Should you invest in Walgreens Boots after a fifth consecutive earnings beat?

On Thursday, Walgreens Boots Alliance Inc. (NASDAQ:WBA) shares spiked nearly 7% after announcing its most recent quarterly results. The company reported its fiscal third-quarter revenue and earnings before markets opened, beating the average EPS estimate for the fifth consecutive quarter.

The company CEO, Rosalind Brewer told CNBC Walgreens earnings managed to beat expectations due to the management’s efforts to keep costs down in an inflationary environment. The company posted FQ3 non-GAAP earnings per share of $1.17, beating the consensus Street estimate of $1.02. 

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However, its GAAP EPS of $0.41 was miles below the average analyst estimate of $0.83, while revenue for the quarter of $34.26 billion came in $870 million ahead of estimates despite edging lower 1.4% from the same quarter a year ago.

Is Walgreens still a good buy?

From an investment perspective, the US drugstore chain’s stock trades at a compelling forward P/E ratio of 10.11, making the stock an exciting option for value investors.

However, analysts expect its earnings to plummet by 88% this year, before rising at an average annual rate of 5.14% over the next five years. Therefore, growth investors might opt for alternatives in the market.

As a result, although WBA looks like a good short-term buy, it may be too late to buy following Thursday’s post-earnings spike.

Technically, Walgreens shares seem to have recently spiked to trade above the 100-day moving average in the intraday chart. As a result, the stock now faces solid resistance from the 100-day moving average, creating an opportunity for a pullback.

Therefore, investors could target potential pullbacks at about $48.70, or lower at $47.09, while $51.76 and $53.37 are crucial resistance zones.

A pullback seems inevitable

In summary, although Walgreens Boots Alliance shares trade at an attractive forward P/E ratio of just 10.11, the stock seems to have rallied closer to overbought conditions. 

Therefore, with the 100-day MA providing solid resistance, Walgreens shares seem poised for a pullback.

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