The COVID-19 Crisis Even Infects Drugstores Earnings Guidance
Walgreens Boots Alliance, Inc (WBA) operates as a pharmacy-led health and wellbeing company. It operates through three segments: Retail Pharmacy USA, Retail Pharmacy International, and Pharmaceutical Wholesale.
WBA released their financial results on Thursday. The company ended up beating analyst estimates for EPS and revenue but missed slightly on same store sales. Given the current climate we’re in, that doesn’t sound half bad. However, the company did pull its full-year guidance as the beat goes on for the COVID-19 crisis. On the news, the stock finished down 6.30% and completed a bearish chart formation called a descending triangle.
Over the past month, WBA has been trying to get its footing after a really bad 2019. It was labeled as one of the “Dogs of the Dow.” Normally that would indicate bullish times ahead and it looked like the business it was in would help it weather through it. However, as the price was bouncing from its $40.50 support to almost $55, falling back again, and then rallying to $47.5 before falling back, it didn’t look hopeful. This progression of descending highs, similar lows at $40.50, and today’s break below support on high volume is what defines a descending triangle.
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The target, based on the pattern, would be the range between the support and the initial high near $54 subtracted from the support. That would provide a target of around $27. That is a level it tested in the last recession and before it’s merger with Boots Alliance in 2015. That is a significant amount of movement that it might take some time to achieve.
Option traders may want to consider a strategy that provides a decent reward, but a higher probability of success. The 15 MAY 20 45/47.5 short call vertical can be sold for around $0.60 or higher. This provides a maximum profit or $60 per contract or 31.5% if the stock closes below $45 at expiration. Consider buying the vertical back early for $0.15 or less.