Beaten-Down Walgreens Stock is Soaring While the Market is Collapsing, But Is It a Buy?

It’s a broadly negative day for stocks, as an unexpectedly strong payrolls report for December has further reduced investors’ expectations for the Fed to cut rates again anytime soon. As a result, bond yields are soaring to their highest levels in over a year, and the major equity benchmarks are tumbling to new 2025 lows.

On the other hand, one of the worst performers in the S&P 500 Index ($SPX) last year is having one of its best days ever, with Walgreens (WBA) stock up 27% after reporting better-than-expected fiscal first-quarter earnings and revenue figures. Sales increased by a stronger-than-forecast 7.5% year-over-year, and management reaffirmed its fiscal 2025 adjusted EPS guidance of $1.60 at the midpoint, which surpassed the Wall Street consensus. 

WBA is now looking to close the session above its 200-day moving average, which it hasn’t done since Jan. 2, 2024. This trendline is located near the $12 level, which marked WBA’s highs after its June 2024 bear gap.

The struggling drugstore chain’s turnaround plan includes closing underperforming stores to stabilize its operations. Separately, the potential sale of Walgreens to a private equity firm adds another layer of complexity - and opportunity.

However, analysts remain generally unimpressed. The 15 experts in coverage have an average rating of “Hold” and a mean price target of just $9.80 for Walgreens stock.

Valued at 6.03 times forward adjusted earnings and 0.05 times forward sales, WBA stock could be undervalued at current levels, though the upside potential largely depends on whether the company successfully executes its turnaround strategy. While the earnings beat is encouraging, investors may want to stay cautious on WBA for now, as the path to sustainable growth is still uncertain.