Shares of Walgreens (WAG) touched a new 52-week high of $53.48 on Thursday, Sep 12, 2013 following uplifted recommendation from the Global Investment Research Division of The Goldman Sachs Group Inc. (GS). The closing price of $53.29 of the largest drug store chain in the U.S. represents a robust year-to-date return of 40.02%.
The Stock Driver
According to several sources, Goldman Sachs recently upgraded Walgreens from Buy to Conviction Buy. The upgraded recommendation comes as the analyst considered Walgreens to be “underappreciated”. The lifted rating sparked market optimism as stock price of Walgreens climbed 5.01% (or $2.54) higher to reach an all time high on Thursday.
Goldman Sachs seems optimistic on Walgreens on the back of its aggressive merger and acquisition activity. Walgreens in its most recent effort to boost its market presence, declared a definitive agreement to acquire certain assets of privately owned regional pharmacy chain Kerr Drug, including 76 retail drugstores and specialty pharmacy business. The acquisition also includes a distribution center.
Furthermore, the company’s deal making spree includes a 10-year deal with AmerisourceBergen Corporation (ABC), effective Sep 1, 2013, to improve its global pharmaceutical supply chain for branded as well as generic drugs. Its three-pronged deal with AmerisourceBergen underlines a strategic collaboration, equity alignment and distribution agreement. This long-term agreement is expected to create a kingpin in the prescription drug purchasing space.
The upgraded recommendation from Goldman Sachs also takes into account Walgreens’ strides to attain synergies from its deal with its partner – Alliance Boots GmbH and the reconciliation of the impasse with Express Scripts Holding Company (ESRX). The healthcare reforms should provide further upside to Walgreens.
Evidently, Walgreens’ deftly chalked out strategy to boost its market presence in the U.S. and across the Atlantic inspired confidence. According to Goldman Sachs, the company is well poised to gain from these tailwinds in the near future and over the long haul.
This upgrade by Goldman Sachs should provide a major boost to the company. Moreover, it is expected to help uphold investor confidence in the largest drugstore chain in the country. Currently, the stock carries a Zacks Rank #3 (Hold).