1. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
3-year high-to-low share price decrease as of August 30: 82.9%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is an Illinois-based retail company that owns pharmaceutical manufacturing and distribution companies. The stock is down by over 66% this year so far because the retail pharmacy chain has been underperforming due to competition from online retailers and pressure from pharmacy benefits managers (PBMs). Additionally, the company cut its dividend by 50% at the beginning of the year, following nearly 50 years of consistent increases. This has led to a loss of investor confidence in the company’s credibility. However, management remains optimistic about their ability to reverse the situation.
The optimism largely stems from Walgreens Boots Alliance, Inc. (NASDAQ:WBA)’s cost-cutting strategies. The new CEO has suggested closing several underperforming stores and reducing primary-care initiatives. Moreover, the company plans to launch a US Retail Pharmacy action plan to improve customer and patient experiences. It will also streamline its US Healthcare portfolio and better integrate its pharmacy and healthcare operations to boost market competitiveness.
Ariel Investments also highlighted this in its Q2 2024 investor letter:
“Alternatively, shares of retail drugstore operator, Walgreens Boots Alliance, Inc. (NASDAQ:WBA), underperformed following an earnings miss and significant reduction to full year guidance, largely due to continued weakness in its U.S. retail business. In response, management announced a multi-year plan for the U.S. business to reduce the retail footprint, invest in the customer experience, align the retail and healthcare businesses for enhanced go-to-market capabilities and simplify the healthcare portfolio. Meanwhile, the company continues to execute on its cost savings initiatives to optimize profitability and is using excess capital to prioritize the sustainability of its operations and balance sheet. Over the medium-term, we expect a re-rating in shares as WBA’s new CEO rebuilds the leadership team and earns credibility by executing on previously articulated strategic imperatives as well as margin.”
Though Walgreens Boots Alliance, Inc. (NASDAQ:WBA) has significantly reduced its dividend, the company’s cash flow remains stable, which suggests that the outlook for future dividends isn’t entirely bleak. In the most recent quarter, the company generated $605 million in operating cash flow and its free cash flow came in at $334 million. In the first nine months of the year, the company paid over $1 billion to shareholders in dividends. The company currently offers a quarterly dividend of $0.25 per share and has a dividend yield of 11.10%, as of August 30.
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) was included in 35 hedge fund portfolios at the end of Q2 2024, down from 41 in the previous quarter, as per Insider Monkey’s database. The stakes held by these hedge funds have a total value of nearly $427 million.
Overall, Walgreens Boots Alliance, Inc. (NASDAQ:WBA) ranks first on our list. While we acknowledge the potential for WBA to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
