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Walgreens Boots Alliance Inc (Nasdaq: WBA) is trading up on Tuesday after a Cowen analyst turned bullish on the Deerfield-headquartered pharmacy giant.

Walgreens stock has upside to $54

The Nasdaq-listed firm has been in an uptrend since early October but Charles Rhyee is convinced that it’s not out of juice just yet.

He sees upside to $54 a share as Walgreens continues to expand its footprint and eventually drive most of its growth from healthcare services.

Market has largely focused on Walgreens stock’s retail exposure to uncertain macro environment. However, while FY23 saw 80% of adjusted operating income from U.S. retail, we expect that to fall to 66% by FY25 and continue to fall.

That strategic shift already helped Walgreens Boots Alliance beat sales expectations in its latest reported quarter. Rhyee expects the retail side of its business to pick up momentum again in the back half of fiscal 2023 as well.

Risk of execution is already baked in

Last month, Walgreens reiterated its commitment to becoming a more healthcare-focused company as it spent about $392 million to buy the remaining stake in CareCentrix. Commenting on the risk of execution, the Senior Research Analyst wrote:

While execution remains a risk, current valuation already discounts it. We view the risk-reward as very attractive and are encouraged by FY25 revenue targets of $14.5 billion to $16.0 billion.

Other recent investments Walgreens has made to expand its footprint in healthcare services include Shields Pharmacy, VillageMD, and Summit Health.

Rhyee also rates its shares at “outperform” because the recent opioid settlement has removed a significant overhang. For the year, Walgreens stock is still down over 20%. A healthy dividend is another reason to invest in this stock.

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