Walgreen (WAG) hasn't had much of a break lately. It didn't do an inversion when it clearly could have, given that it is actually merging with a real live foreign company, Alliance Boots. It had a ton of hedge fund owners who fled it like bats out of hell when it didn't invert. The chief financial officer was fired after a more than a billion dollar change down in estimates. He has subsequently sued, claiming he was pressured into making some too-high projections. There was even a point-of-sale database mishap, which hurt the firm for a couple of days.
It's been a terrible time for Greg Wasson and his team. But sometimes terrible times create discounts, which is why Action Alerts Plus has been buying it right here, and I sense that Walgreen's luck is about to change. That's because Walgreen's isn't joining Rite Aid (RAD) and CVS (CVS) in refusing to be part of the Apple (AAPL) Pay ecosystem. Rite Aid and CVS have their own systems they are developing for mobile, with which they can capture information about you; Pay is therefore more secure and your data is stored on your phone not with Apple and not with the store you are shopping at.
I think that after the huge breaches at Home Depot (HD) and Target (TGT), people are very concerned about privacy and security. The one thing that we know is that the Apple system is acclaimed to be the most safe and most private. One look at the positive note in the New York Times about Tim Cook talking about rapid adoption tells you that Apple's got something that's steamrolling this industry.
It would not surprise me that the anti-Apple pay intransigence of CVS and Rite Aid drives customers to Walgreen as so many apparently love the ease with which Pay works. That's why I know Walgreen isn't going to go back on its Apple word. There's too much business being taken from its principal competitors.
Won't Walgreen fall behind CVS and Rite Aid in data capture? I think Walgreen is making a bet that you will have to offer the choice of Apple in order to get the maximum number of customers, including customers that might not otherwise go to Walgreen. I hate ever to analogize to tobacco, but it's pretty clear that Walgreen is pro-choice there, too, even as I wish they weren't.
I think this is a win for Walgreen and a loss for the other two companies I like in this heavily consolidated industry, CVS and Rite Aid.
Can it be a needle mover? From the early returns, I have to answer a resounding YES!