The indignities keep piling up for Walgreens Boots Alliance.
The company was bounced from the Dow Jones Industrial Average in February and its stock fell to its lowest level Thursday since 1997.
And Walgreens now is in danger of getting dropped from the Nasdaq 100 index, or NDX, and the most likely replacement is Super Micro Computer. A change could come soon.
Walgreens shares fell 22.2% to $12.19 Thursday after the company said it would close thousands of pharmacies. It also cut financial guidance for the current fiscal year to around $2.87 a share, below the consensus of $3.21.
Walgreens’ market value is about $10.5 billion, making it vulnerable to being cut from the Nasdaq 100 since that index requires members to be at least 0.1% of the total market value, which is now about $23 trillion. Walgreens is at about 0.05% now and has the smallest market capitalization in the index.
The NDX rules are that a company can be dropped if it fails to maintain an 0.1% weighting at two consecutive month-ends and a suitable replacement can be found. Walgreens didn’t meet that test at the end of May and likely won’t at the end of June.
“If, at any time, it is determined that an index security is ineligible for continued inclusion, it will be removed as soon as practicable,” the inclusion criteria state.
Some think Walgreens could be dropped in September in conjunction with the quarterly rebalancing of the index. That is what happened with the removal of Sirius XM Holdings on June 24 in favor of Arm Holdings. But the Walgreens removal could occur sooner.
Super Micro Computer, the hot maker of servers used to power AI, has seen its stock triple this year. The shares were up 7.1% to $890.36 Thursday and the NDX speculation may have helped. Super Micro’s market value is around $52 billion and is the most discussed potential addition to the NDX, which is composed of 100 of the biggest nonfinancial companies in the Nasdaq. Super Micro was added to the S&P 500 index earlier this year.
The NDX is less popular as an index for ETFs and passive indexers with an estimated 2% to 3% passive exposure, against 20%-plus for the S&P 500. The largest ETF is the $285 billion Invesco QQQ Trust(QQQ). Still, index buying and selling on component changes can be meaningful with Sirius XM down 3% on Monday when it was dropped.
It has been a long road down for Walgreens, whose stock peaked at nearly $100 in 2015. It was once viewed as a Costco-like retail growth story and carried a price/earnings ratio of over 30 due to what investors viewed as a wide moat for its pharmacy business. That has changed.
“We are at a point where the current pharmacy model is not sustainable, and the challenges in our operating environment require we approach the market differently,” CEO Tim Wentworth told investors Thursday.
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