Walgreens Boots Alliance (NASDAQ: WBA) has faced a tumultuous year, with its stocks plummeting by two-thirds. The company’s woes stem from declining drug reimbursement payments, an ill-fated acquisition, and a financially cautious customer base.
The Challenge of Amazon
Traditionally, pharmacies felt shielded from e-commerce disruptions due to the urgent nature of medication needs. However, Amazon has disrupted this notion by rapidly expanding its same-day pharmacy services. Originating its e-commerce pharmacy in 2020, Amazon piloted same-day delivery in select cities last October. By March, the service had reached Los Angeles and New York City, with plans to roll out to 20 more cities by 2025. This move aims to provide same-day delivery to up to half of the United States by the end of next year. Amazon even experimented with drone deliveries in College Station, Texas.
Walgreens recently disclosed its potential closure of a quarter of its stores. While this step may yield benefits by channeling customers to remaining locations, the allure of Amazon’s swift delivery could divert patrons seeking convenience amid illness.
Challenges and Opportunities for Walgreens Stock
Over and above Amazon’s burgeoning threat, Walgreens grapples with persistent drug reimbursement hurdles. Pharmacy benefit managers (PBMs) have created a challenging scenario where filling certain prescriptions, including popular weight-loss drugs, incurs losses for pharmacies. Walgreens advocates for a cost-plus model to ease inflation pressures and enhance services but faces resistance from major PBMs.
The U.S. government’s involvement in the PBM market has taken the form of a Federal Trade Commission (FTC) lawsuit against three prominent PBMs for inflating insulin prices. A favorable ruling could enhance industry transparency and reform PBM practices.
While Walgreens’ stock currently trades at a low valuation, the company stands at a crossroads between Amazon’s encroachment and the potential shifts in the PBM landscape. With store closures and a reevaluation of its VillageMD investment, Walgreens holds the prospect of resurgence. Therefore, despite the complex risks, Walgreens stock might beckon as a speculative buy.
Considering Investment in Walgreens Boots Alliance
Before diving into Walgreens stock, investors should ponder recent developments. The Motley Fool Stock Advisor analysts have identified ten promising stocks for substantial returns, with Walgreens Boots Alliance not making the cut. This curated list has a historical precedent, as exemplified by Nvidia’s ascent following a similar recommendation in 2005.
The Stock Advisor service offers investors a strategic blueprint for success, featuring expert insights and bi-monthly stock suggestions that have substantially outpaced the S&P 500 since 2002.
Exploring the wealth of dynamics in play surrounding Walgreens Boots Alliance underscores the evolving terrain of the pharmaceutical industry and the shifting sands of stock market investments.