Rite Aid is Undervalued; Buy Her Now
Hey value investors you may want to consider Rite Aid (RAD) as a value play now. Now that Walgreens (WBA) has agreed to purchase half of RAD she will be poised for greatness for the value investor and here's why.
Walgreens is paying a little over $5 billion for half of RAD retail footprint. Being that RAD has $7.3 billion in debt, this deal will help RAD dissolve two thirds of said debt which helps them generate cash flow. Also those stores RAD is selling to WBA are their lesser performing stores, so this is Rite Aid trimming the fat making them leaner and more nimble. Rite Aid will be entitled to the cheaper drug cost for a few years as part of the Walgreens partial acquiring. RAD will be able to purchase drugs at the same price their bigger competitor Walgreens does which improves RAD's gross margins, bolstering their bottom line; thus RAD stock price will go up!
If all of this wasn't enough to make you jump on board then try this one out: Rite Aid could still be bought out by Amazon (AMZN). This is more likely than not because Jeff Bezos, Amazon's CEO has already stated they want in the pharmacy retail space (and pretty much every facet of your life). Just recently Amazon hired an individual with expertise in said space.
Keep in mind that Rite Aid wanted the Oct 2015 proposed acquisition by Walgreens they didn't need the deal. Thus the stock price, currently at $2.54 is beaten way down because Wall Street sold her off on pessimistic outlook that the Federal Trade Commission (FDC) would block the merger in entirety between WBA and RAD for antitrust concerns (monopoly). Now speculation of that merger is behind them and it's time to look forward, that said RAD has most likely found its bottom. Look for Rite Aid to go $4 to $6 as they will have way less debt, bigger margins, top performing stores only and could still be bought by Amazon or someone else. If you are looking for an investment, you could double or even triple your money at Rite Aid's current price.
