Walgreens Boots Alliance meeting gives Deutsche Bank 'increased faith'

© Reuters.

By Sam Boughedda 

Walgreens Boots Alliance (NASDAQ:WBA) shares are up over 4% Friday after Deutsche Bank analysts upgraded the stock to Buy from Hold, raising the firm's price target on the stock to $50 from $41.

In a note to clients, the analysts explained that they recently hosted a meeting with senior management at Walgreens, where "investors' focus was squarely on the recently announced Summit/Village MD acquisition deal," as well as the company's shift to a healthcare services company.

Earlier this week, it was announced that Walgreens-backed VillageMD will acquire Summit Health in a deal valued at $9 billion.

"We came away from the meeting with increased faith in the company's ability to execute on its care delivery strategy, which should lead to positive revisions and multiple expansion for WBA shares," the analysts wrote.

He added that the Summit deal has generally been seen as a positive by investors, and a key theme in their meetings was Walgreens' transition from a pharmacy-led healthcare business to a more comprehensive consumer healthcare services company with pharmacy as a "key leg in the stool."

"The Summit deal catapults Walgreens through VillageMD into the position as one of the largest investor owned, multi-payer primary care business in the US (UNH at No. 1), expecting to exit 2023 with more than 700 locations and generating $8B in revenue. The Summit deal likely sidelines WBA from large scale M&A near term, as the company moves into integration mode for the next 12-18 months," the analysts concluded.