Rite Aid Corporation (NYSE: RAD), through its subsidiaries, operates a chain of retail drugstores in the United States. The company operates through Retail Pharmacy and Pharmacy Services segments. The Retail Pharmacy segment sells prescription drugs; and a range of other merchandise, such as over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise, and other every day and convenience products.
Shares of Rite Aid have jumped over 30% this week and the rise could be related to one, or both of the news articles listed below.
November 27, 2017. Rite Aid Corporation announced that it has completed the pilot closing and first subsequent closings under the amended and restated asset purchase agreement entered into on September 18, 2017, resulting in the transfer of 97 Rite Aid stores and related assets to Walgreens Boots Alliance, Inc. https://finance.yahoo.com/news/rite-aid-announces-first-closings-211500009.html
November 21, 2017. Amazon should acquire Rite Aid to obtain state pharmacy licenses and add a regulatory-cleared infrastructure, according to one Wall Street analyst on Tuesday. If Amazon were to launch pharmacies in Whole Foods, on Prime and Prime Now, an acquisition of Rite Aid would accelerate market share gains, according to Cowen analyst John Blackledge. https://finance.yahoo.com/news/amazon-buy-rite-aid-start-154056385.html
Yes, Blackledge mentioned Rite Aid and Amazon in the same sentence on CNBC, and the story was reposted in a few publications. Apparently, even the suggestion that Amazon might have an interest is enough to be a catalyst. Never mind that Amazon has made no public statement to that effect, but has made moves that may indicate an entry into the pharmacy/health markets.
More recently, RAD announced that it has begun the process of selling stores to the Walgreen Boots Alliance, a deal that has been in the works for a long while. After regulators balked at Walgreens’ proposal to acquire Rite Aid entirely, Rite Aid agreed to a new plan in September that sold 1,932 of its stores to Walgreens for $4.375 billion in cash. it seems as if the sale of the Rite Aid stores is on track, starting with the 97 stores this week.
While it is possible the spike in RAD shares this week is due to the start of the store transfer to the Walgreens Boots Alliance, one can never discount the value of dropping the Amazon name.
In Traders News Source coverage of Rite Aid in June, we recounted a CNBC report, http://www.cnbc.com/2017/05/16/amazon-selling-drugs-pharamaceuticals.html, where it was reported that Amazon was taking steps toward their goal of breaking into the pharmacy market. The CNBC report states:
Each year, Amazon holds an annual meeting to discuss whether it should break into the pharmacy market, said a source familiar. This year, it is getting more serious and Amazon is looking to hire a general manager. Industry experts say this could be a multibillion market opportunity for the e-commerce company. The company recently started selling medical supplies and equipment in the U.S., and is hiring for its “professional health care program” to ensure that the company is meeting regulatory requirements.
In the United States alone, more than 4 billion prescriptions are ordered every year. In 2015, patients, insurance companies and other payers spent an estimated $300 billion on prescription drugs. If competition really does bring products closer to cost; Amazon has the potential to be a disruptive force in the pharmacy industry.
The sale of its retail stores has been a long process for Rite Aid and the likelihood of Amazon muddying up the Walgreens waters doesn’t seem a possibility at this point. But hey, Walgreens is buying half of the Rite Aid stores, and there is always CVS.
Rite Aid Corporation, through its subsidiaries, operates a chain of retail drugstores in the United States. The company operates through Retail Pharmacy and Pharmacy Services segments. The Retail Pharmacy segment sells prescription drugs; and a range of other merchandise, such as over-the-counter medications, health and beauty aids, personal care items, cosmetics, household items, food and beverages, greeting cards, seasonal merchandise, and other every day and convenience products. This segment also operates retail clinics that provide treatment for common conditions; and a range of preventive services, including screenings, medical tests, immunizations, and basic physical exams. In addition, this segment provides healthcare coaching and disease management services. The Pharmacy Services segment provides pharmacy benefit management (PBM) services and a range of pharmacy-related services. This segment also performs prescription adjudication services for other PBMs; offers integrated mail-order and specialty and compounding pharmacy services; and provides infertility treatment, as well as drug benefits under the federal government’s Medicare Part D program. As of June 20, 2017, the company operated approximately 4,500 stores in 31 states of the United States and in the District of Columbia.
On November 29, 2017 RAD shares were trading at $2.21 (+16.93%) on traded volume of 96 million shares.
RAD shares are trading above their 50-day moving average of $1.82 and below their 200-day moving average of $3.12. The current RSI (14) is 72.11
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