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Tuesday, December 1, 2020

Rite Aid Corporation (NYSE:RAD) is Liquid and Smaller and it’s Paying Off

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Rite Aid Corporation (NYSE:RAD) is working its way up the charts. RAD is currently in the middle of a merger/asset purchase agreement with Walgreens (WBA). The sale is happening in phases and RAD has incurred $1,309.8 million so far and completely paid off their debt. This liquidity might be the catalyst for the company’s notable surge in price. RAD has gained 29.1% in the last three months, outperforming the industry’s growth of 7.6%. Moreover, the company has witnessed significant upside in the past month with shares surging as much as 14.9%.

As of last week, RAD transferred 625 stores and related assets to WBA, and has received cash proceeds of $1,309.8 million, which it is using to repay all of its $970 million of outstanding secured loans while maintaining a strong liquidity position. Under the Asset Purchase Agreement, WBA will purchase a total of 1,932 stores, three distribution centers and related inventory from Rite Aid for an all-cash purchase price of $4,375 million on a cash-free, debt-free basis.

Rite Aid Corporation (NYSE:RAD) is one of the nation’s leading drugstore chains with more than 4,500 stores in 31 states and the District of Columbia and fiscal 2017 annual revenues of $32.8 billion.

Rite Aid Corporation is a retail drugstore chain. The Company’s segments include Retail Pharmacy and Pharmacy Services. The Company operates under The Rite Aid name. It operates approximately 4,560 stores in over 30 states across the country and in the District of Columbia. The Company’s Retail Pharmacy segment consists of Rite Aid stores, RediClinic and Health Dialog. It sells brand and generic prescription drugs, as well as an assortment of front-end products, including health and beauty aids, personal care products, seasonal merchandise, and a private brand product line. Its front-end products include over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise and numerous other everyday and convenience products. The Company’s Pharmacy Services segment consists of EnvisionRx, which provides a range of pharmacy benefit services.

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“Our teams continue to make tremendous progress in transferring stores to WBA and I want to thank them for their ongoing commitment and dedication,” said Rite Aid Chairman and CEO John Standley. “We are on track to complete the transfer of stores in the spring of this year. Going forward, we remain focused on the continued smooth execution of that process and capitalizing on our most significant business-building opportunities as we work together to deliver a great experience to our customers and patients, and drive value for our shareholders.”

One interesting source of optimism for RAD is that the company’s new found liquidity and smaller exposure to pharmacy reimbursement rates might make it more profitable per share. In addition, the Pharmacy Benefit Management and its Envision Rx service are both big winners with the latter growing in membership.

Overall, in the last year, RAD’s shares have traded in a range of 1.38 – 7.23. The share price has gained 60.87% from its 52 week low. The company’s shares are currently trading above their 200-day moving average. Many investors are coming into the fold here and going long the stock thinking that there is nowhere to go but up.

Rite Aid Corporation (NYSE:RAD) has a current market cap of 2.31B and float of 1.04B. The company now has stronger cash on hand with its debt all but paid. Last year, RAD accrued $32.8B in revenue, and now with a smaller and maybe tighter ship there is room to see profits if leadership plays their cards right. Sign-up for continuing coverage on shares of $RAD stock, as well as other hot stock picks, get our free newsletter today and get our next breakout pick!

Disclosure: we hold no position in $RAD, either long or short, and we have not been compensated for this article.

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