Michael Cherny, an analyst from Leerink Partners, maintained the Hold rating on Walgreens Boots Alliance (WBA – Research Report). The associated price target remains the same with $22.00.
Michael Cherny has given his Hold rating due to a combination of factors surrounding the potential sale of the Boots segment by Walgreens Boots Alliance. Cherny acknowledges that divesting Boots aligns with the company’s strategic focus on its core US Retail Pharmacy and Healthcare businesses, which could prove beneficial in the long run. However, he notes that the sale would necessitate the use of proceeds to reduce debt, which could affect the company’s financial leverage due to Boots’ contribution to the overall earnings. Moreover, the strong performance of Boots has not been fully recognized in WBA’s current market valuation, leading to caution in the rating decision.
Additionally, Cherny is awaiting more information on the potential buyer market for Boots, especially considering its recent strong operating results, which might have changed from the past assessments. The fact that no formal sales process has been reported yet adds to the uncertainty. Cherny recalls that a previous attempt to sell Boots under a former CEO did not materialize, which implies a need for careful consideration of the current situation. The prospective valuation of Boots at approximately $8.8 billion suggests a moderate EBIT multiple, indicating that while the asset is valuable, its sale is not without complexities that could impact WBA’s financials and operations.
WBA’s price has also changed moderately for the past six months – from $20.170 to $18.120, which is a -10.16% drop .
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Walgreens Boots Alliance (WBA) Company Description:
Retail pharmacy leader Walgreens Boots Alliance (NASDAQ:WBA) operates through its namesake brand Walgreens in the U.S. and Boots in the U.K. In addition, it owns retail and business brands including the No7 Beauty Company, Duane Reade, Ahumada in Chile, and Benavides in Mexico. The company also targets equity investments in healthcare, pharmacy, and retail and has a presence in over 25 countries with more than 450,000 employees.
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