Can Walgreens Boots Alliance Stock Keep Soaring?

Core Viewpoint - Walgreens Boots Alliance shares surged 27.5% on January 10, 2024, but this is insufficient to recover from a 64% decline in the previous year [1] Financial Performance - In the fiscal first quarter ending November 30, 2024, adjusted earnings were $0.51 per share, exceeding Wall Street's consensus estimate of $0.40 per share, although still less than half of previous earnings [4] - Walgreens provided a forward-looking guidance range of $1.40 to $1.80 per share for fiscal 2025, compared to the analyst expectation of $1.58 per share [5] - U.S. retail pharmacy sales increased by 6.6% year over year, but adjusted operating income from U.S. retail operations fell to 1.3% of sales, down from 4% two years ago [10] Analyst Insights - Evercore analyst raised the price target for Walgreens from $9 to $12 per share, reflecting a positive adjustment but still close to the stock's closing price of $11.75 [6] Industry Challenges - The retail pharmacy industry faces significant pressure from vertically integrated pharmacy benefits managers (PBMs) that control 79% of prescription drug claims, which Walgreens lacks [7][8] - The rise of low-cost providers like Mark Cuban's Cost Plus Drugs has made dispensing generic drugs a low-margin business, impacting Walgreens' profitability [9] Operational Losses - Walgreens' U.S. healthcare segment reported a loss of $325 million in the fiscal first quarter, contributing to an overall operating loss of $245 million for the period [11] - The high dividend yield of over 8% is attractive, but without profits, there is a risk of future dividend cuts [12]