On Wednesday, RBC Capital Markets adjusted its financial outlook for shares of Walgreens Boots Alliance (NASDAQ:WBA), reducing the price target to $9 from the previous $13 while maintaining a Sector Perform rating.
The stock, currently trading at $8.94, has fallen nearly 63% year-to-date and according to InvestingPro analysis, appears fairly valued. The adjustment follows a review and update of the firm's financial model, alongside additional commentary provided subsequent to their initial note from October 15th.
The revision in the price target was accompanied by a lowered forecast for the company's fiscal year 2025 adjusted earnings per share (EPS), now set at $1.52, down from the earlier $2.10 projection. This change reflects management's expectations of ongoing headwinds in the U.S. Retail Pharmacy sector into the next year.
The company, with a current market cap of $7.8 billion and trailing twelve-month revenue of $147.7 billion, maintains an EV/EBITDA ratio of 13.2x. Despite the downward revision in EPS, revenue estimates for FY25 were slightly increased to $149.0 billion, up from $146.1 billion.
Furthermore, the forecast for fiscal year 2026 adjusted EPS has also been revised downward to $1.45 from the previous estimate of $2.22. The new price target of $9 is based on a valuation of 6 times the calendar year 2025 adjusted EPS estimate.
This valuation continues to represent a discount compared to Walgreens' historical average and to its retail pharmacy peers. For deeper insights into WBA's valuation metrics and over 30 key financial indicators, check out the comprehensive analysis available on InvestingPro.
RBC Capital Markets has justified the discounted valuation, stating it is appropriate due to a slower EPS growth trajectory and a more prolonged path to growth in light of Walgreens' new strategic direction.
According to InvestingPro's Financial Health assessment, the company currently shows a WEAK overall score of 1.73 out of 5, supporting the firm's commentary that indicates a cautious outlook on the company's ability to quickly adapt and overcome the challenges it faces in the retail pharmacy sector.
In other recent news, Walgreens Boots Alliance has reached a preliminary settlement in a shareholder derivative lawsuit, according to a recent filing with the Securities and Exchange Commission.
Following the release of its fourth-quarter fiscal year 2024 results and fiscal year 2025 projections, Walgreens has been the subject of several analyst adjustments. TD Cowen has retained a Buy rating for Walgreens but reduced the price target to $14 due to revised earnings per share projections for fiscal year 2025.
Mizuho (NYSE:MFG) maintained its Neutral stance on Walgreens, keeping the price target steady at $10.00. Leerink Partners increased its price target for Walgreens from $9.00 to $10.00, maintaining a Market Perform rating. BofA Securities maintained its Underperform rating on Walgreens with a steady price target of $7.50, citing persistent challenges despite the company's cost-cutting measures.
Deutsche Bank (ETR:DBKGn) lowered its price target for Walgreens to $10.00, maintaining a Hold rating due to concerns raised by the company's recent financial performance and future guidance. These are recent developments in the ongoing story of Walgreens' efforts to navigate a challenging retail environment.
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