1. Walgreens Boots Alliance, Inc. (NASDAQ:WBA)
Number of Hedge Fund Holders: 35
Year-to-Date Share Price Performance: -64.95%
Walgreens Boots Alliance, Inc. (NASDAQ:WBA) is a multinational holding company that operates major pharmacy chains such as Walgreens in the U.S. and Boots in the U.K. It was formed after Walgreens’ full acquisition of Alliance Boots, after initially purchasing a stake in 2012. The company has since grown to include retail, pharmaceutical manufacturing, and distribution operations in multiple countries. It is a significant player in the pharmacy sector, ranking among the largest U.S. corporations
Walgreens (NASDAQ:WBA) has seen better days but they haven’t occurred over the past few years. While it tops our list of worst-performing stocks of the current year, the company stock price also shows declines of nearly 83% over the last 5 years. Direct-to-consumer competition and operational challenges have significantly impacted the company’s performance over the last few years.
However, CEO Tim Wentworth joined the company in 2023 and is looking to make a turnaround, especially through cost-cutting measures. While the company’s losses widened in FY 2024, some positives gave the stock some breathing room. The company is up nearly 11% over the last 30 days, as of October 24.
In fiscal 2024, the company surpassed its cost-saving targets by achieving $1 billion in savings, reducing capital expenditures by $600 million, and generating $500 million from working capital initiatives. Additionally, it cut net debt by $1.9 billion and lease obligations by $1.2 billion.
Walgreens Boots’ (NASDAQ:WBA) strategy is now focused on being a retail pharmacy-led company, aiming to leverage consumer trust, convenience, and relevance. Plans include closing 1,200 underperforming stores over the next 3 years while investing in 6,000 profitable ones. 500 closures are expected in fiscal 2025, with a focus on underperforming or cash flow negative locations. It is also refreshing its product assortment, with a focus on health and wellness, especially women’s health.
The company aims to generate more free cash flow, reduce net debt, and monetize non-core assets like VillageMD. It is negotiating pharmacy reimbursement contracts to ensure fair pricing. The company will continue focusing on pharmacy margins, retail strategy, and debt reduction in fiscal 2025.
According to TD Cowen, Walgreens Boots (NASDAQ:WBA) adjusted EPS will keep dropping in fiscal year 2026, although the decline will be slower. It expects earnings to start growing again in fiscal year 2027. The firm maintains a Buy rating on the stock but reduced the price target for the stock by $2 to $14.
While we acknowledge the potential of Walgreens Boots Alliance, Inc. (NASDAQ:WBA) as an investment, our conviction lies in the belief that 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 WBA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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