• Consolidation in the industry

• A bullish trend since November 2020

• Recent earnings have been impressive

• Annual revenues are growing

• A juicy dividend and much higher targets on the long-term chart

Walgreens Boots Alliance, Inc. (WBA) operates a pharmacy-lead health and beauty retail company. WBA operates through three segments including, Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale.

As of the end of August 2020, the Retail US segment operated 9,021 retail stores under the Walgreens and Duane Reed brands and six specialty pharmacies. The international segment operated 4,428 retail stores under the Boots, Benavides, and Ahumada brands in the United Kingdom, Thailand, Norway, Ireland, the Netherlands, Mexico, Chile, and 550 optical practices; 165 operate on a franchise basis. The Wholesale segment engages in wholesale distribution of specialty and generic pharmaceuticals, health and beauty products, and home healthcare supplies and equipment, and related services to pharmacies and healthcare providers. The segment operates in countries worldwide, even in locations where WBA does not have retail stores.

WBA has been in business since 1901, with its headquarters in Deerfield, Illinois.

The company had a $47.075 billion market cap at $54.53 per share as of May 7 and has tremendous growth potential.

Consolidation in the industry

In the US, Walgreens Boots Alliance (WBA) and CVS Health Corporation (CVS) are the two dominant forces in the pharmacy-led health and beauty retail sector. The global pandemic spotlighted these companies, as their retail outlets reach the overwhelming share of the addressable market, a combined nearly 19,000 locations across the United States. While the two companies have almost the same number of sites, WBA’s portfolio includes thousands more worldwide.

WBA and CVS have a lock on the growth industry. The pandemic has only increased their profiles as both are convenient locations for the COVID-19 vaccines.

A bullish trend since November 2020

After reaching a low of $33.36 on October 30, 2020, WBA shares have made higher lows and higher highs.

Source: Barchart

As the chart highlights, WBA rose to its latest peak at $57.05 on April 6, 2021 and was trading not far below that level on May 7 at around the $54.53 level.

Meanwhile, WBA shares could have lots of upside room as they are nowhere near the all-time high.

Source: Barchart

The long-term chart dating back to the 1980s illustrates WBA reached its record high in August 2015 at $97.30 per share, nearly 80% above the current price level.

Recent earnings have been impressive

Since Q2 2020, WBA beat consensus EPS forecasts half of the time. Over the past two quarters, the company exceeded expectations.

Source: Yahoo Finance

As the chart shows, the most recent earnings report for Q1 2021 came in at $1.26 per share versus consensus forecasts for $1.11. The earnings trend over the past three quarters has been positive.

Annual revenues are growing

WBA’s revenues have also been rising consistently over the past years.

Source: Yahoo Finance

The chart shows the growth trend from 2017 through 2020.

Source: Yahoo Finance

The quarterly trend was uneven in 2020 as the pandemic weighed on all retail businesses. However, the higher level in Q1 2021 compared to Q4 2020 is a positive sign. A survey of eighteen analysts on Yahoo Finance has an average price target of $54.22 per share for WBA, with forecasts ranging from $33 to $72. While the stock is trading right near the average, analysts continue to view the prospects in a mostly positive light.

Source: Yahoo Finance

As the chart shows, the current ratings are all neutral to outperform for the stock.

A juicy dividend and much higher targets on the long-term chart

One of the most attractive factors for WBA is the company’s dividend yield. The $1.87 per share dividend translates to a 3.43% yield at $54.32, higher than CVS’s 2.35% yield at $85.11 per share.

Source: Yahoo Finance

The first upside technical target for WBA shares is at the November 2019 $64.50 high. Above there, the December 2018 $86.31 peak and the August 2015 $97.30 high are targets for the bulls.

Given its position in the sector and its global footprint, WBA is a growth stock that pays investors a handsome dividend while they wait for capital appreciation.

WBA shares were trading at $54.60 per share on Tuesday morning, down $0.51 (-0.93%). Year-to-date, WBA has gained 38.22%, versus a 10.86% rise in the benchmark S&P 500 index during the same period.

About the Author: Andrew Hecht

Andy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...

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