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Pro: ‘I’d stay far away from Walgreens Boots Alliance’

David Wagner does not like Walgreens stock

Walgreens Boots Alliance Inc (NASDAQ: WBA) is down 5.0% on Thursday after a U.S. federal judge held the chain of retail pharmacies accountable for its part in fuelling the opioid crisis in Lake and Trumbull counties.

David Wagner doesn’t like ‘WBA’

The court threw in CVS Health and Walmart in its ruling as well, and said the three have to pay a combined $650.6 million to the two Ohio counties.

Interestingly, however, David Wagner (Equity Analyst at Aptus Capital Advisors) says the Walgreens stock was a “sell” even without the news this morning. Explaining why on CNBC’s “Power Lunch”, he said:

I don’t like this stock because of structural issues. Over the last seven years, they’ve had about a 1000 bps worth of gross margin degradation because reimbursement rates continue to get reset lower. So, I’d stay far away from it.

Walgreens to face tough comparisons

Wagner is convinced the pandemic was a significant boost to Walgreens, which, therefore, is up against a rather challenging comparisons moving forward. And then, there’s today’s verdict.

Nail on the head right there. It’ll be a headline risk. Walgreens has more of a liability problem than CVS because one, they had a pretty large settlement in 2012 with the DEA on this issue. And secondly, they had to control their own distribution.

Last month, the Nasdaq-listed firm blamed lower post-COVID demand for a significant year-on-year hit to its Q3 results. The stock is now down roughly 30% for the year.

Also on Thursday, Walgreens said it sold 11 million shares of Option Care Health in an underwritten secondary offering. It now owns 14.4% of the home health care services company.

The post Pro: ‘I’d stay far away from Walgreens Boots Alliance’ appeared first on Invezz.