Walgreen Company (WAG) is in the process of a dramatic up cycle, as the company has acquired stakes in both a leading U.K. drug chain and large U.S. drug wholesaler, and is expected to earn $5 a share as well as increase its share price 50%, says Stuart Shikiar, Chairman and Chief Investment Officer of Shikiar Asset Management Inc.
“[Walgreens is] a leading drug store chain in the United States. They have about 8,000 stores and are considered to be a very fine operator. However, a catalyst has developed that we have found to be very, very scintillating and that was, they acquired a 45% interest of the largest drug chain in the U.K., Boots. Boots is the CVS (CVS) or Walgreens of England. They have 3,000 stores, and it’s a very well-run organization. Walgreens bought a 45% stake in the company with the opportunity to increase the position to 100% in about four years’ time,” Shikiar said.
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Walgreen Company has also announced an agreement with one of the largest drug wholesalers in the world, called AmerisourceBergen Corp. (ABC), which will give the company a more effective purchasing mechanism, Shikiar says. He believes WAG will be a leading global drug chain, as the company is in an up cycle and could see a 50% increase in share price.
“You now have a company that we believe will be the leading global drug chain with outstanding supply and wholesale prowess, and we believe that within the next three years this company will be earning $5 a share. We don’t think it’s been fully recognized that this company is in the process of a major dramatic up cycle and the valuation makes this very attractive. It is a stock we are keen on, and we believe it’s current price of $48 represents the type of investment that in two or three years, could be up 50% from here,” Shikiar said.
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