• Walgreens Boots Alliance’s financial metrics are on the mend, with a 6% YoY revenue growth and topping EPS estimates by 3 cents.
• Its current assets outstrip its market capitalization by a significant margin.
• Trading at a mere 3.9x forward earnings, it boasts the highest dividend yield in the S&P 500 at 9.27%.

Walgreens Boots Alliance, Inc. (NASDAQ:) stands as a prominent global retail pharmacy and healthcare entity. Witnessing a 60% decline from its yearly peak, with a YTD performance slump of 58.5%, the market has dealt harshly with both Walgreens and its prime competitor, CVS Health Co. (NYSE:), in the retail/wholesale sector.

Under siege from various quarters ranging from online pharmacies like Amazon.com, Inc. (NASDAQ:) to big-box stores offering pharmaceuticals and sundries such as Walmart Inc. (NYSE:) and Target Corporation (NYSE:), Walgreens has seen its market share dwindle. Despite this, the company’s third-quarter results for 2024 are stirring optimism as it embarks on a recovery journey.

Four compelling reasons now make a case for investing in this stock:

1) Embracing a Resurgence: Enhancement in Growth Metrics

Walgreens has showcased a remarkable contrast to rival CVS Health, registering a 6% YoY revenue surge to $37.5 billion in its latest fiscal quarter, eclipsing estimates by $200 million. The earnings per share (EPS) of 39 cents exceeded consensus projections by 3 cents.

Unlike CVS Health, which operates as an insurer courtesy of Aetna, Walgreens focuses on the provider angle in the healthcare segment. This strategic stance has shielded it against the escalating medical benefits ratio (MBR) erosion that insurers are grappling with in the realm of Medicare Advantage.

While Pharmacy sales saw a robust 9.6% YoY uptick, Retail sales faced a 3.5% dip YoY. The company surpassed its $1 billion cost-saving target in fiscal 2024 and aims to shutter 1,200 underperforming outlets over three years, initiating with 500 closures in fiscal 2025 to bolster free cash flow and EPS immediately.

2) Asset Value Surpasses Market Capitalization

Walgreens’s 10-K lays bare its current assets valued at $18.34 billion, twice the current market cap of $9.33 billion. Notably, its property, plant, and equipment worth $9.8 billion eclipses its market cap. Although it grapples with substantial debt of $32.67 billion, a probable interest rate cut cycle promises relief in financing costs.

Approximately 78% of the U.S. populace reside within five miles of a Walgreens or Duane Reade outlet, ensuring convenient access to healthcare services. Moreover, the Walgreens Find Care telehealth platform bridges patients and customers with healthcare solutions via a mobile app. With over 13,000 global stores, including 3,688 Boots retail outlets in the UK, Walgreens remains a ubiquitous presence.

3) Unparalleled Valuation Metrics: A Blast from the Past

Walgreens stock is currently trading at historically low levels, sporting a modest 3.79x forward earnings ratio. Additionally, its Price-to-book (P/B) ratio is a mere 0.33, while the price-to-cash flow stands at 1.37. Wallowing at $10.79 per share, these prices harken back to the late ’90s.

Boasting a 9.25% dividend yield, Walgreens edges closer to the possibility of S&P 500 exclusion post-Amazon’s entry into the Dow Jones Industrial Average in February 2024. Despite its 15.4% YTD climb, a Christmas rally coupled with a January Effect surge might buoy the stock.

4) Forming a Chart Pattern: Cup and Handle

The cup pattern unfolds as the stock retreats from a crest, forms a rounded base, and rallies to retest the peak. A handle emerges as the stock dips from the peak, bounces back, and holds steadfast above, now serving as a support level.

Walgreens set its cup’s peak at $11.14 and bottomed out at $8.25, crafting a rounded base before retesting the $11.14 threshold. Presently in retreat, awaiting the handle formation, a reversal could trigger an upward breakout. The stock’s daily support sits at $9.52 while Fibonacci pullback marks fall at $10.72, $10.19, $8.93, and $8.25.

Analysts peg Walgreens Boots Alliance with an average price goal of $13.38 and a pinnacle target of $22.00. Amid two Buy, eight Hold, and four Sell ratings, shorts account for 13.3% of the stock.

Actionable Strategies: Bullish investors mull cash-secured puts at Fib pullback supports for entry, complemented by covered calls for added returns apart from the 9.27% dividend.