Rite Aid Stock Is Sick — Here’s How to Remedy Your Portfolio

Adjust your investing strategy around RAD stock.

Rite Aid stock hit a five-year low on Monday and is down by at least a third of its value year to date. From its all-time high in August 2015, it’s down 86 percent. So what is the prescription for the drugstore chain?

Rite Aid has been a little left out as big players like Walmart, Target and Amazon enter the healthcare market. Health spending in the United States is forecast to rise 5.3 percent this year and continue on an upward trend for the next 10 years.

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The drugstore chain has tried to find a partner but has been thwarted.

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Walgreens and Rite Aid attempted to merge in 2015, and then revised the terms of the deal in 2016 and again in 2017. The deal, which was expected to face intense scrutiny from the Federal Trade Commission, was scrapped in June 2017 when Walgreens agreed to buy 2,186 Rite Aid stores, roughly half of the total, for $5.2 billion.

Rite Aid then tried to merge with supermarket giant Albertsons, but stockholders objected, saying that Rite Aid’s assets were undervalued.

The company reported its results for the second fiscal quarter of 2019 as a net loss of $352.3 million or $0.33 per share. The net loss from continuing operations was $7.9 million or $0.01 per share, roughly half of the loss reported for the same quarter last year.

Underscoring the instability of the company, Rite Aid announced Thursday that director Bruce Bodaken will become chairman, replacing CEO John Standley in that role. Standley will remain as CEO. The company said three independent directors will be nominated.

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Rite Aid shares are trading at $1.275 as of Sept. 28. Of the eight analysts covering the stock, seven recommend holding, and one recommends buying.

By contrast, competitor Walgreens is rated a buy or strong buy by 15 of 24 analysts and a hold by the rest. CVS is rated a buy or strong buy by 15 analysts and a hold by nine.

Rite Aid could extricate itself from its current dire situation by finding a white knight to acquire it, or by selling off stores. But the likelihood of it turning itself around to become a major player in the increasingly competitive retail drugstore business seems pretty small.

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