After a devastating few years, it is hard for any investor to deny that the economic climate is anything but bearish. With repeated global thrashings from the COVID-19 pandemic followed closely by sanctions against the Russian Federation, international investors have been left reeling.
But even in the darkest of times, there are a few rays of sunshine. While many investors look at bear markets as a time of distress, savvy investors are finding the companies that are trading at a discounted price and scooping them up.
Walgreens Boots Alliance
Walgreens Boots Alliance is a global retail and wholesale pharmacy leader. The company offers more than 85,000 healthcare service providers and employs more than 225,000 workers. Walgreens is a trusted name in the healthcare industry and provides customers with access to quality prescriptions, vaccinations, and health services.
Despite its strong branding and reputation, the company has not been immune to the effects of COVID-19. WBA’s stock took a hit in March 2020 when the pandemic first began to spread. The stock is currently down 36% in the last fiscal year alone, and is trading at a significant discount to fair value.
Since Walgreens heavily depends on brick-and-mortar sales, the effect of the lockdown is one of the driving forces behind the decline in the retail pharmacy and healthcare giant’s stock price.
But with a strong focus on its health and wellness offerings, WBA is looking to diversify its business model to insulate itself from future economic downturns. This move away from pure retail plays should help Walgreens’ bottom line when the next recession inevitably hits.
Walgreens Post-Pandemic Strategies
Like many other businesses that suffered from the pandemic, Walgreens has implemented a strategic change to help it weather any future economic storms.
The primary goal for the management team was to trim $2 billion worth of fat from the company’s annual operating costs by the end of fiscal 2022, and they achieved this a full year ahead of schedule. And while this may seem like a tremendous success in the eyes of the shareholders, the real value is what Walgreens plans on doing with their newfound cost savings and future earnings.
The company plans to use this money to bolster its e-commerce and digital offerings. This play should pay off handsomely for Walgreens in the long run, as people are increasingly shopping online.
Some immediate changes have been implemented, allowing drive-through pickups, home delivery, and in-app ordering. These changes will help Walgreens keep up with the competition and stabilize future earnings.
Walgreens Strategic Partnerships
The second reason for strong optimism for the future of Walgreens is its strategic partnerships. Walgreens aims to have 3,000 Walgreens health corners that health professionals will staff, primarily achieved through their multiple alliances.
The first partnership is with VillageMD. VillageMD is a leading provider of primary care services in the U.S., focusing on providing high-quality patient care and improving outcomes. This partnership would promote patients getting their medical work and prescriptions fulfilled by Walgreens due to the proximity of the two businesses.
Under the partnership, VillageMD and Walgreens plan to open 1,000 full-service clinics by 2027, and they already have 120 co-owned stores in operation.
Another promising partnership is with the tech giant Microsoft. Microsoft and Walgreens are teaming up to transform healthcare delivery.
The partnership will focus on four main areas:
- Improving patient engagement through the use of technology.
- Enabling staff collaboration through the use of technology.
- Improving care coordination.
- Using data to drive decision-making.
Microsoft’s technological advancements will help Walgreens staff provide better care for patients. This will likely lead to higher customer satisfaction and, in turn, more business for Walgreens.
The partnership is still in its early stages, but the potential upside is tremendous. If Microsoft and Walgreens can successfully revolutionize healthcare delivery, it would be a game-changer for the industry.
A further partnership is with the logistics company Narvar. This partnership is essential because it will help Walgreens with its accessibility and convenience for customers.
Navar already has an alliance with Nordstroms, which Walgreens will now get to leverage. This partnership will allow customers to pick up and return orders in thousands of more locations. This massive win for Walgreens will make it much easier for customers to do business with them.
Walgreens has been lagging behind its competitors in terms of convenience, and this partnership should help close that gap.
These partnerships show that Walgreens is focused on the future and committed to improving its business model. These changes should help the company weather any future economic storms and emerge as a stronger company.
Is Walgreens a Buy?
If you’re looking for a healthcare stock that is seriously undervalued, then look no further than Walgreens. With a strong focus on its health and wellness offerings, WBA is looking to diversify its business model to insulate itself from future economic downturns. This move away from a pure retail play should help Walgreens’ bottom line and diversify its offerings to mitigate future crises.
Add the company’s strategic partnerships with VillageMD, Microsoft, and Navar; you have a recipe for future success. So, if you’re looking for a healthcare stock that is criminally undervalued, Walgreens should be at the top of your list.
Based on our calculations, WBA has upside of 41% to $46.16 per share, using a discounted cash flow forecast analysis.