Is Walgreens Stock a Bargain or a Wreck? A Deep Dive into WBA's Struggles and Opportunities

Oliver BlakeTuesday, Jun 24, 2025 5:47 am ET
140min read

Walgreens Boots Alliance (WBA) has become the poster child of underperformance in recent years, lagging far behind the NASDAQ Composite's tech-driven gains. But is this divergence a temporary blip or evidence of deeper structural issues? Let's dissect WBA's strategic challenges, valuation, and the looming Sycamore Partners acquisition to determine whether its current slump presents a buying opportunity—or a warning sign.

The Underperformance: Numbers Don't Lie


The data is stark. Over five years (2020–2025), WBA's stock rose just 65.8%, while the NASDAQ Composite surged 92.4%. Even in 2025, despite a YTD rebound of 21.65%,

WBA
trails the NASDAQ's 1.82% YTD return—a gap widened by tech stocks' dominance in AI and cloud computing. Over three years, WBA's 67% gain still lags the NASDAQ's 58.7% (using S&P 500 as a proxy), but the real pain comes in the 2024 crash: a 61% plunge as operational pressures and a delayed Sycamore deal hit investor confidence.

Strategic Challenges: Earnings Misses, Dividend Cuts, and a Rocky Acquisition

  1. Earnings Collapse: Analysts project a 45.8% YoY drop in EPS for 2025, driven by declining pharmacy sales and rising costs. WBA's Q1 2025 results missed estimates by 20%, with same-store sales falling 1.6%—a sign of waning foot traffic and competition from Amazon's pharmacy services.

  1. Dividend Cut: The dividend was slashed to $0.25/share in November 2024 from $0.45 in 2022, signaling financial strain. With a current yield of just 2.2%, it's a far cry from its 4% yield in 2020.
  2. The Sycamore Acquisition: A $53 billion leveraged buyout proposed in 2021 is still pending regulatory approval. While it promises to reduce debt and streamline operations, delays and rising interest rates have clouded its prospects. If it fails, WBA's debt-heavy balance sheet could become a liability.

Valuation: Is WBA a Discount Deal or a Value Trap?


At a forward P/E of 6.5x, WBA trades at a 40% discount to CVS Health (10.8x) and Rite Aid (9.2x). Its P/B ratio of 0.7x suggests the market values its assets below book value—a rarity in retail. This could signal undervaluation, but there's a catch: WBA's profitability is eroding. Its net margin has dropped from 3.5% in 2020 to just 1.2% in 2024.

The Bull Case: The Sycamore deal could unlock value by reducing debt (currently $12.8 billion) and focusing on high-margin areas like specialty pharmacies. A rebound in same-store sales or a breakthrough in its health-tech ventures (e.g., telehealth partnerships) could revive growth.

The Bear Case: WBA's core pharmacy business faces existential threats. Amazon's $4 billion acquisition of One Medical and its push into prescription delivery could undercut WBA's dominance in retail drugstores. Meanwhile, its underfunded e-commerce platform and aging store locations make it vulnerable to disruption.

Why the NASDAQ Outperforms: A Structural Divide

The NASDAQ's tech-heavy composition has thrived on AI, cloud, and biotech tailwinds, while WBA's traditional retail model struggles against secular declines. Investors are rewarding companies with high growth rates and scalable business models, whereas WBA's reliance on brick-and-mortar pharmacies and declining drug reimbursements makes it a relic in this era. Unless WBA pivots aggressively—say, through a tech-driven health platform—it may never catch up.

Investment Decision: Buy the Dip or Bail?

  • Buy Signal: If you believe the Sycamore deal will proceed and turn WBA's finances around, the stock's low valuation offers a margin of safety. A recovery in pharmacy sales or a dividend reinstatement could spark a rally.
  • Sell Signal: Persistent losses, regulatory rejection of the acquisition, or further margin compression could send shares back to $9.

The Verdict: WBA is a high-risk, high-reward play. Investors with a 3–5 year horizon and tolerance for volatility might nibble at the stock near $11, but it's no “set it and forget it” investment. The NASDAQ's outperformance isn't temporary—it reflects a broader shift to tech-driven growth, and WBA's comeback hinges on reinvention, not nostalgia.

Final Take: Walgreens isn't dead yet, but its resurrection depends on execution. For now, the NASDAQ's outperformance isn't a fluke—it's a mirror reflecting WBA's structural challenges. Proceed with caution.

Data as of June 23, 2025. Past performance does not guarantee future results.