Rite Aid Corp (RADCQ)

[Prudent Capitalist]

Yikes! New article out today is brutal:

Rite Aid Is a Dead Company Walking

Rite Aid is due to report earnings for the quarter ending in February on April 25, and they are not going to look pretty. The consensus is for a loss of 1 cent per share, on revenues of $8.39 billion but the “whisper number” — the guess they’re giving their best clients — is even worse, a loss of 3 cents per share.

Suspense over the deal is not just killing the stock, it’s killing the company. Income statements filed since the deal was announced show the company at break-even, but in fact cash flow has flatlined and its debts, $7.27 billion on assets of $11.66 billion, are not getting paid.

By way of contrast, at the end of October WBA reported just $17.76 billion of debt on its $72.5 billion of assets, and it usually manages to bring almost 4% of its revenue to the net income line.

If acquired by Walgreens, Rite Aid would deliver a nice footprint of new operations. Most of its stores are in the Northeast or California. Walgreens has a much broader geographic distribution, with over 700 stores in Texas, where Rite Aid doesn’t operate at all.

The Bottom Line for RAD Stock

This is a stock for gamblers. If the Trump people can get to the FTC by the end of June and push through the merger, you’re looking at a 46%-65% profit on your investment, by the end of July.

If the FTC holds firm, you’re buying a money-losing chain of drug stores, in a deteriorating retail environment, facing two giant competitors in WBA and CVS Health Corp (NYSE:CVS) that could crush it between them, leaving the rural pieces for Wal-Mart Stores Inc (NYSE:WMT) and Amazon.com, Inc. (NASDAQ:AMZN) to swallow at their leisure.

I suspect the odds are a little better than 50-50 here, but I don’t really go to Wall Street to gamble. Are you feeling lucky?

http://www.msn.com/en-us/money/topstocks/rite-aid-corporation-rad-stock-must-die/ar-BBA30sr