Walgreens Had Another Bad Year. Hopes Aren’t High for 2021.

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With the 12 months nearly over, we’re looking in any respect 30 shares within the

Dow Jones Industrial Average,

beginning with the worst performers—

Boeing

and

Walgreens

Boots Alliance—and dealing our approach as much as the highest-flying inventory within the benchmark—

Apple.

The rating might shift earlier than the shut of 2020 buying and selling, however the tales behind the shares shouldn’t.

A pandemic that makes customers concentrate on their well being would possibly appear to be a tailwind for a significant pharmacy like Walgreens Boots Alliance. In actuality, the shares took a beating in 2020, and face considerations in regards to the 12 months to return.

Walgreens (ticker: WBA) slid 32.8% this 12 months, making it the second-worst performer within the Dow. It was the worst laggard in 2019.

Walgreens rolled out Covid-19 testing capabilities and is trying to facilitate vaccinations as effectively. But the coronavirus did extra hurt than good for the inventory. Though earnings have been improving a bit, worry of an infection has led many customers to get their medicines delivered. Which means much less shopping and shopping for within the non-pharmacy parts of Walgreens shops. The Boots division, Walgreens’ U.Okay. operation, additionally has languished.

Amazon.com’s

(AMZN) choice to supply medicines by mail through Amazon Pharmacy, unveiled in November, might scale back foot visitors much more, in addition to chopping into Walgreens’ gross sales of medication. The e-commerce large has been taking steps toward the prescription-delivery business for years, however shares of Walgreens and

CVS Health

(CVS) shares both tumbled in response to the information, even when investors may be overreacting.

On the plus aspect, all that signifies that expectations, which haven’t been high all through 2020, will possible stay low going into the brand new 12 months. But on the similar time, Walgreens might wrestle to persuade traders that issues are turning round, particularly in its troubled U.K business.

Persevering with enhancements to earnings, higher non-pharmacy gross sales, and proof that Amazon isn’t consuming Walgreens’ lunch would in all probability all assist the inventory, as might more dividend increases. Proof that its vaccination program helps the corporate, or that its newly revamped myWalgreens loyalty program is gaining traction, would even be welcome.

Analysts aren’t holding out a lot hope for Walgreens. They’re a usually bullish-leaning bunch, however not one of the 21 tracked by FactSet fee the inventory at Purchase. Eighty-six % fee it at Maintain or the equal, whereas 14% are bearish. The typical goal for the inventory worth is $40.41, not removed from its present degree of a bit above $39.

Search for Walgreens’ incomes for its fiscal first quarter, on account of be disclosed in early January, to be the subsequent catalyst for the inventory. Perhaps 2021 will probably be a greater 12 months for the chain, to not point out the Dogs of the Dow total.

Write to Teresa Rivas at teresa.rivas@barrons.com