Analyst: Walgreens Stock a ‘Hold,’ Expects FTC to Oppose Rite Aid Acquisition

Analysts at Needham on Wednesday initiated stock coverage on Walgreens Boots Alliance ( WBA) with a “Hold” rating, while commentating on the looming FTC decision on the pharma giant’s acquisition of rival Rite Aid ( RAD) .

“We expect the FTC will oppose WBA’s proposed acquisition of RAD by the July 7 deadline,” Needham analyst Kevin Caliendo argued. “We do believe that WBA will litigate and perhaps can structure a transaction for a smaller portion of RAD at a lower price.”

If the FTC were to approve the deal by the deadline, it could provide a 25 cent boost to Walgreen’s full-year 2019 earnings and help it form the largest retail pharmacy network.

Nonetheless, Caliendo contended that Walgreen’s management has done a “commendable” job leveraging its retail network to land partnerships with pharmacy benefit managers (PBM), a third-party administrator of prescription drug programs for commercial health plans.

Those efforts could drive earnings per share growth upwards of 10% over the next couple of years he added.

Shares of Walgreens were moving higher during early Wednesday morning trading. 

What’s Hot On TheStreet

The stock market may be overvalued: Now may be the time to pay extra attention to red-hot tech stocks such as Apple (AAPL) and Facebook (FB) . As TheStreet first reported Tuesday afternoon, asset valuations are somewhat “rich” by standard metrics, Federal Reserve Chair Janet Yellen said in London during a conversation about economic issues with British Academy President Lord Nicholas Stern. Yellen’s comments on equity valuation and bank strength closely mirrored Fed Vice Chairman Stanley Fischer’s from an IMF event held earlier in the day.

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