Walgreens Boots Alliance (NASDAQ:WBA) released its latest earnings report this month and although the results were encouraging, the stock has been in a tailspin ever since, falling by more than 7%. The pharmacy retailer posted earnings per share of $1.51 for the quarter ending May 31, which was well above the $1.17 that analysts were expecting. Revenue of $34 billion for the period was also better than Wall Street's projections. Not only that, but the company expects its adjusted earnings to grow by 10% this year.
What has investors concerned is that the strong numbers are due to COVID-19 vaccinations. That's because as vaccination rates climb, there's a concern that the boost the company has gotten from COVID-19 could taper off. And that could make it more difficult for Walgreens to meet its heightened forecast, which is now priced into the stock.
But the stock is cheap; Walgreens is currently trading at a forward price-to-earnings ratio of just 10. However, investors may also not be willing to pay much of a premium for a company that has had to revamp its stores and adjust its business in the wake of growing competition, particularly from tech giant Amazon (NASDAQ:AMZN), which has been getting deeper and deeper into the health-care industry. There are even rumors swirling that it may even be looking to launch physical pharmacies at some point.
Although there are challenges ahead for Walgreens, the business has been doing well even amid some difficult times and the recent selloff looks to be an overreaction; buying today could be a great move for long-term investors.
