Rite Aid Corp. (NYSE: RAD) has had some bad times, having tumbled 55.18% since June 9th of last year, the company has had no rest, but it may be time for some reprieve. Hovering just above its 52 week low, it was at its 52 week high just last Friday.
There are many things not going RAD’s way; there is the lack of FTC decision on a merger with Walgreens (NASDAQ: WBA), there is growing concern and belief that this deal won’t even be on the table for much longer as WBA is losing interest after working on this deal for over a year, and there is Amazon, with whispers and murmurs abound about the online giant will infiltrate the pharmaceutical space. There is also the matter of public sell offs of RAD stock, like major owner David Einhorn, as well as Bluecrest Capital Management trimming its standing. But as always there are some silver linings.
Rite Aid still has a full year EBITDA of $1,137.1 million, revenues of $32.8 billion, its net income is low and falling, and with the full year figure standing at $4.1 million, but with the previous year net income standing at $165.5 million the company is hemorrhaging money from the decline in the Retail Pharmacy Segment. The company had also closed 40 stores, but also opened 12, acquired 3 and remodeled 348 locations. Now, there are clear problems, but there are sunrays.
Should the deal find a way through, holding it at a price around its 52 week low should pay out nicely in the long run. The company is also looking for ways to remodel and improve profitability, as per Chairman and CEO John Standley, “We are also taking steps to review our ongoing strategy, reduce costs and make necessary changes to our business to improve our performance going forward." Even though the future of the company is highly reliant on the deal with Walgreens, a deal that is slated for July 31st, 2017, it does have the ability to bounce back on its own, albeit slower and with more hurdles.
However, chances are that the FTC would not approve the amended agreement, even with the clause to divest 1,000-1,200 stores, odds are stacked against Rite Aid. Either way, once this debacle comes to an end, hopefully it will in the next month, the company one way or another will have unburdened itself from this massive cloud hanging over it, and valuation should rise again.