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Why Walgreens Boots Alliance Stock Reversed Course in June

George Budwell, The Motley Fool

What happened

Shares of the drugstore giant Walgreens Boots Alliance (NASDAQ: WBA) gained a healthy 10.8% during the month of June, according to data from S&P Global Market Intelligence. What sparked this abrupt turnaround?

Walgreens shares bolted higher last month in response to the company's better-than-expected fiscal third-quarter earnings report. Specifically, the drugstore behemoth reported $34.6 billion in revenue for the quarter, which topped Wall Street's consensus estimate by about $70 million. 

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Image Source: Getty Images.

So what

Through the first five months of the year, Walgreens' shares had lost a staggering 26% of their value, thanks to an historically poor fiscal second-quarter earnings report combined with Amazon's potentially game-changing purchase of PillPack last year.

Shareholders, in turn, were apparently ready to cheer even a small win, evidenced by Walgreens' stock gaining a stately 10% on the news that its top line had simply flatlined -- instead of losing further ground -- in the most recent quarter, compared to the same period a year ago. 

Now what

Walgreens is stuck between a rock and a hard place. While the company's drastic cost-cutting measures should buoy its bottom line for a year or so, Walgreens desperately needs to find a new source of revenue growth. The long and short of it is that the retail landscape has forever changed with the emergence and subsequent maturation of e-commerce.

Moreover, Amazon's entrance into the world of prescription drugs could seriously harm Walgreens' core business. Stated simply, Walgreens needs to prove to investors that it indeed can adapt to the age of e-commerce.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.