Chicago, IL – Walgreens, a prominent retail pharmacy chain, has faced significant challenges in 2024 as its stock price plummeted by over 50%. The company, known for its widespread presence and essential services, saw its shares drop to less than $12 from a starting price of $26 earlier in the year.

Despite the downward trend in the stock price, investors are eyeing the company’s quarterly dividend, which now yields over 8%. This raised questions among veteran investors about whether the current situation presents a lucrative opportunity for passive income or a risky investment choice awaiting a potential turnaround.

The company’s recent Q3 earnings report revealed a substantial decline in non-GAAP EPS and operating income compared to the previous year. With lower-than-expected revenues and operational losses, Walgreens also announced plans to close a significant number of underperforming stores in the next three years.

One of the significant challenges facing Walgreens is the impact of pharmacy-benefit managers (PBMs) on reimbursement rates for prescription drugs. The dominance of PBMs in setting reimbursement rates has put pressure on chain drug stores like Walgreens and CVS, affecting their profit margins.

Additionally, the company is grappling with the increasing use of generic drugs, a decline in foot traffic post-COVID vaccination drives, and reports of employee burnout among pharmacists. These factors, along with the uncertainty surrounding the future dividend payout and the stock’s current valuation, have left investors cautious about the company’s prospects.

In response to these challenges, Walgreens is focusing on negotiating with health insurers and PBMs to improve profitability. The company also plans to enhance the consumer experience in its stores through a retail pharmacy initiative and scaling back certain business operations like VillageMD.

As investors weigh the potential for a turnaround, Walgreens’ CEO emphasized the need for strategic changes and a focus on parts of the business with future growth potential. With uncertainties surrounding the stock’s performance and the company’s turnaround efforts, the verdict remains divided on whether Walgreens is a buy, sell, or hold in the current market conditions.