What’s Next For WBA Stock After Its Recent 27% Rise?

Walgreens stock (NASDAQ:WBA) surged 27% on Friday, Jan 10, after the company reported upbeat Q1 (fiscal ends in August) results. It reported revenue of $39.5 billion and adjusted earnings of $0.51 per share, compared to the consensus estimates of $37.3 billion, and $0.38, respectively. Walgreens maintained its full-year earnings outlook of $1.40 to $1.80 per share.

While the investor optimism following Q1 results boded well for WBA stock, if you want upside with a smoother ride than an individual stock, consider the High-Quality portfolio, which has outperformed the S&P, and clocked >91% returns since inception.

Looking at Q1 performance, Walgreens’ revenues were up 7.5% y-o-y, primarily benefiting from its U.S. Retail Pharmacy business, rising 10% y-o-y to $24.7 billion, International sales were also up 10% to $6.4 billion, and the U.S. Healthcare business, up 12% to $2.2 billion. The Pharmacy revenue growth was primarily driven by drug price inflation as well as higher prescription volume. The Germany wholesale business continued to lead the growth for the company’s international operations, while the Boots business also saw higher sales. Walgreens’ adjusted operating margin declined to 1.3% in Q1’25, versus 1.6% in the prior-year quarter. It reported adjusted earnings of $0.51 per share, compared to $0.66 per share in the prior-year quarter. Overall, the company fared better than anticipated in Q1.

While WBA stock fared well post the Q1 announcement, the changes over the last four-year period have been far from consistent, with annual returns being considerably more volatile than the S&P 500. Returns for the stock were 36% in 2021, -25% in 2022, -25% in 2023, and -61% in 2024. The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, is considerably less volatile. And it has comfortably outperformed the S&P 500 over the last four-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.

Given the current uncertain macroeconomic environment around rate cuts and geopolitical tensions, could WBA face a similar situation as it did in 2022, 2023 and 2024 and underperform the S&P over the next 12 months — or will it see a recovery? Despite its recent move, we think WBA stock has more room for growth. We maintain our Walgreens’ Valuation to be $14 per share, based on a 9x forward expected adjusted earnings of $1.59, slightly below the stock’s average P/E ratio of 10x over the last four years. Given the company’s current challenges, particularly concerning profitability, we believe a lower valuation multiple compared to its historical average is warranted.

While WBA stock looks like it can see higher levels, it is helpful to see how Walgreens’ Peers fare on metrics that matter. You will find other valuable comparisons for companies across industries at Peer Comparisons.

[1] Returns as of 1/13/2025
[2] Cumulative total returns since the end of 2016

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