Retail pharmacy chain operator Walgreens Boots Alliance (WBA) is considering selling its majority investment in VillageMD, a nationwide primary care provider. WBA could sell either a part or full stake of its majority ownership in VillageMD, as the latter faces a dire liquidity crunch. Also, the company is considering strategic options to facilitate the substantial future cash requirements for VillageMD. These include the closing of underperforming clinics to curtail costs.
Importantly, Walgreens cut its full-year outlook in June, when it reported mixed Q3 FY24 results. The company cautioned that it would shut down non-preforming stores to improve its bottom line. A weak consumer backdrop has impacted retailers, including pharmacy chains.
In January 2023, WBA provided a $2.25 billion senior secured credit facility to VillageMD, on which the latter has defaulted. Accordingly, WBA entered into a forbearance agreement with VillageMD to remediate the situation in consultation with its stakeholders and other third parties. As of June end, WBA held a 53% stake in VillageMD.
Insights from TipRanks Bulls Say, Bears Say tool
According to TipRanks Bulls Say, Bears Say tool, Bears are worried about WBA’s declining profitability, margins, and earnings, which remain under pressure from macro headwinds. Moreover, analysts have slashed the price target for WBA stock owing to the company’s poor financial performance.
On the other hand, Bulls are optimistic about WBA’s cost savings plan, VillageMD’s restructuring, expected improvement in cash flows, and expansion into new markets.
Is Walgreens Boots a Good Stock?
On TipRanks, WBA stock has a Hold consensus rating based on two Buys, seven Holds, and three Sell ratings. The average Walgreens Boots Alliance price target of $13.67 implies 26.8% upside potential from current levels. Meanwhile, WBA shares have lost 57.7% so far this year.
