Is it time to buy Walgreens stock?

Investors hate uncertainty, and the resignation of Walgreens Boots Alliance  (WBA) - Get Free Report CEO Rosalind Brewer on Friday morning only increased the worry.

The announcement said Brewer and the company, which runs the Walgreens and Duane Reade chains, mutually agreed to part. It came two months after Walgreen's fiscal-third-quarter earnings missed estimates and the company cut its full-year earnings guidance 10% to $4 to 4.05 a share. 

Brewer's two-year tenure suggests the company is dealing with too many problems and many mistakes, some of which predate Brewer, and will take months, if not years, to resolve. 

The biggest challenge is that pharmacy chains have been gobbling one another up in recent years. At the same time, they've been trying to transform themselves into healthcare companies where they provide physician and nursing care along with prescriptions. Walgreens is the majority owner of Village MD, a network of primary-care clinics. 

But the drug-store chains have discovered that growing that kind of business requires time and money. Meanwhile, revenue growth and earnings growth, both current and future, are not especially visible. 

The dog of the Dow

The stock, which closed Friday at $23.43, off 15.5% in August, is the worst performer among stocks in the Dow Jones Industrial Average (^DJI) - Get Free Report, down 15.5%. It is also the Dow's worst performer this year, down 37.3%. And that's on top of 2022, where the shares were  down 28.3%, seventh worst among the Dow stocks. (Here, one must cut Walgreens a little slack. 2022 was a rotten year for stocks.)

Shares of arch-rival CVS Health  (CVS) - Get Free Report are also struggling. While they were up 8% in August and up slightly on Friday, they're down 29.5% for the year.

Rite Aid  (RAD ) - Get Free Report, also a major competitor, may file for Chapter 11 bankruptcy protection to shelter itself from ballooning lawsuits over its alleged role in opioid sales as well as a $3-billion debt load. The shares are off 93% since Aug. 12, 2022.

One can argue Walgreens' problems escalated when it merged with the Swiss-British pharmacy company Alliance Boots in 2014.

A treacherous market

Walgreens faces an extremely intense and complex competitive landscape. The classic pharmacies compete against themselves and also the likes of Walmart  (WMT) - Get Free Report, Costco Wholesale  (COST) - Get Free Report, grocery giant Kroger  (KR) - Get Free Report, online pharmacies and pharmacy benefit managers that act as middlemen between insurance companies, pharmacies and drug companies.

This is where things get complex. CVS Health owns CVS Caremark (thanks to its $68-billion merger with Aetna in 2018). Rite Aid owns Environ RX. Health-insurance giant UnitedHealth Group (UNH) - Get Free Report operates Optum RX.

On Friday, Walgreens did name Ginger Graham as interim CEO. She has been lead independent director. Graham is a healthcare veteran whose experience includes CEO of Amylin Pharmaceuticals (now part of AstraZeneca  (AZN) - Get Free Report) and Group Chairman of pacemaker manufacturer Guidant Corp. (now part of Boston Scientific  (BSX) - Get Free Report). 

The company says it plans to do a formal CEO search, presumably for someone with extensive healthcare experience. Brewer came to Walgreens after stops at Starbucks and Walmart's Sam's Club.

The company is not broke. It has been paying a 48-cent-per-share quarterly dividend and hasn't signaled that might be threatened. 

As a group, the 15 analysts who cover the stock aren't high on the shares. Eleven rate the stock a hold (not a sign of confidence). Two more recommend selling with just two with strong buys. The mean target price has been stuck at $33.38 for several weeks — a far cry from 2015 when the price hit $96.68. 

Its relative strength index is at 20, which implies it is seriously oversold. RSI is an indicator of a stock's momentum. A reading under 30 is an oversold signal and could attract a speculator looking for a short-term rally.

So, there could be a bounce, especially if Wall Street likes whoever becomes the next CEO.