After a challenging year for Walgreens (WBA) investors in 2024, the company’s first-quarter results exceeded expectations, offering a glimmer of hope for a strong start to 2025. However, analysts remain cautious about the stock’s outlook, even before a new lawsuit from the Department of Justice (DOJ) led to a sharp drop in shares.
Among the eight analysts following Walgreens, tracked by Visible Alpha, four issued “hold” ratings, three recommended “sell,” and only one analyst gave the stock a “buy” rating. The average price target was set at $10.81, slightly below Walgreens’ closing price of $11.37, which fell more than 9% following the lawsuit news.
Analysts from Jefferies and Deutsche Bank, both of which have maintained “hold” ratings on the stock, expressed caution earlierlast month despite the better-than-expected financial results. Jefferies noted that while the performance was promising, the company was not yet out of the woods. “We don’t see it as an ‘all clear’ just yet,” Jefferies analysts stated, emphasizing the need for more positive developments before predicting a full turnaround.
The analysts highlighted ongoing challenges in Walgreens’ retail pharmacy business, which remains under pressure despite the company’s cost-cutting measures, including the closure of hundreds of underperforming stores. These actions have yet to significantly alleviate the persistent difficulties facing the sector.
The latest DOJ lawsuit introduces an additional layer of regulatory risk, further complicating the company’s already troubled retail environment. During an earnings call earlier last month, Walgreens’ CEO acknowledged that some strategies, such as locking up products, had not delivered the expected results, underscoring the ongoing operational hurdles the company faces.
As Walgreens continues to navigate these complex challenges, analysts warn that the path to recovery remains uncertain, with regulatory and market pressures continuing to weigh on its future prospects.
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