Credit Suisse Reiterates Neutral, Raises PT On Walgreens Boots Alliance On Balanced Risk/Reward

In a report published Friday, Credit Suisse analyst Edward J. Kelly reiterated a Neutral rating on Walgreens Boots Alliance Inc. (NASDAQ: WBA), and raised the price target from $73.00 to $85.00.

In the report, Credit Suisse noted, "The combination of a new professional management team and WBA's almost 500 bps margin gap to CVS in U.S. retail has investor's keenly focused on the earnings potential of this company. To help frame this complicated issue, we performed an in-depth analysis of the gap to determine how much is structural versus execution related. Ultimately, we believe structural issues could account for well more than half of WBA's underperformance and simplistically using this gap to extrapolate earnings upside may not be the best idea. The true opportunity at WBA, in our view, is the upside from creating a ‘Best-in-Class' company from a cost, merchandising, and financial perspective. Our bottom-up work indicates this could be meaningful, but also not easy in the face of longer-term industry headwinds. In the end, while we are admittedly more positive (especially around the cost opportunity), the risk/reward seems to be balanced and we are maintaining our Neutral rating. We are raising our target price to $85 to better reflect our outlook."

Walgreens Boots Alliance closed on Thursday at $83.20.