Evercore ISI Downgrades Walgreens Boosts Alliance (WBA) to In Line

July 10, 2018 6:15 AM EDT
Get Alerts WBA Hot Sheet
Price: $44.62 +2.06%

Rating Summary:
    6 Buy, 26 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 8 | Down: 8 | New: 71
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Evercore ISI downgraded Walgreens Boosts Alliance (NASDAQ: WBA) from Outperform to In Line with a price target of $67.00.

Analyst Ross Muken commented, "We are downgrading shares of Walgreen from Outperform to In Line, ending one of the more painful experiences I have endured in my 15+ years as a sell-side analyst. Typically I hate reactive downgrades (at least we waited a few days post the AMZN news) but in this case we were really struggling to put together a coherent thesis on why WBA should outperform post the AMZN / PillPack news. While we are certainly not in the camp of believing AMZN will emerge as a massive threat to the pharmacy overnight or even over the medium to long term (we do however see a continued risk to the front end), we do believe the market now has a sufficient amount to worry about re long-term margins, which means terminal value could remain impaired (and reflected in a compressed multiple). The current wall of worry is simply too high to climb in our view, as AMZN risk joins drug pricing uncertainty, front end erosion, EU fee pressure, and Brexit volatility. Furthermore, sell side estimates still appear to be too high in the out years from an OI perspective, with consensus implying a return to 6%+ profit growth in 2020 and beyond (wrong algorithm in our view). Thus if numbers are not going up (and may go down) and the long litany of potential headwinds are unlikely to be de-risked medium term thus keeping the multiple impaired, how does one actually get improved returns here? That’s ultimately the question we could not answer and thus we are moving to the sidelines."

For an analyst ratings summary and ratings history on Walgreens Boosts Alliance click here. For more ratings news on Walgreens Boosts Alliance click here.

Shares of Walgreens Boosts Alliance closed at $63.73 yesterday.



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