As an outside observer looking to add WAG to my portfolio have a few observations to share.
Up until the first of the year WAG was bouncing along for quite a while between 30-35. From what I can see the big run-up to 50 was nothing more than riding the coat tails of the upward bounce with the Dow. Sure the not so good earnings report impacted the stock price, but I also believe the downward market trend did too. Believe the near-term trend in the Dow will be down and Wag will follow so for what it’s worth I’m taking a wait and see position with a tentative buy target price of $40/share. I would appreciate any RATIONAL feedback from any you that may have more insight in WAG.
During the past year, before this earnings miss, WAG was up more than 70% while the Dow was up 20%. This was much more than riding the coat tails of the Dow. It was a combination of the rising markets, the ESRX settlement, the Boots purchase and the Bergen deal. If you are correct that the Dow drops in the near term, perhaps WAG will correct a little also, but that's anything but a sure bet. WAG enjoys tremendous institutional support. The company has stated they expect revenues to rise to $130 billion/year by 2016. That's a rise of 83% in 3 years. Institutions will support the current price. The European expansion will gain strength as Europe recovers from recession. The deal with Bergen (ABC) gives WAG additional buying power and more efficient distribution while reducing costs associated with their current warehousing and distribution. WAG will be taking a 23% stake in ABC at below market price. The company continues to recover from the ESRX dispute and when Dept. of Defense signs back on that will be a big boost. WAG 3q results were actually quite impressive as earnings gained 16% yoy. Analysts may have gotten a little ahead of themselves with their rosy expectations.