Shares of drugstore chain Rite Aid Corp. (RAD) which stood at $1 a month ago are struggling to return to that level, thanks to the downbeat investor sentiment. After falling to the multi-year lows, the stock has remained below the $1-mark for such a long time that it is currently facing the risk of being delisted from the New York Stock Exchange.
The management is currently mulling a reverse stock-split, among other options, after receiving a notice from the stock exchange asking it to raise the stock price in order to stay compliant with the listing norms. The share-price compliance rule stipulates that the average closing price of stocks should be least $1 for 30 consecutive days.
The compliance rule stipulates that the average closing price of stocks should be least $1 for 30 consecutive days
The downtrend, which began following a couple of botched merger deals and a management reshuffle, gathered pace last month after the company reported a net loss for the third quarter, triggering a stock selloff. Meanwhile, giving hope to the shareholders, the stock gained about 3% Friday to $0.77, improving slightly from the 9-year low. Now, what needs to be seen is whether the company will go for a merger of its outstanding shares to increase the per-share value. Over the past twelve months, the stock declined 62%.
Analysts’ consensus rating on Rite Aid is hold, with the majority of market watchers predicting that the stock will bounce back in the next 52 weeks. Painting a bleak picture of the company’s future performance, the management expects it to report a net loss for 2018 and the next fiscal year, hurt by continued softness in comparable sales growth.
The chances of a rebound will depend on the company’s ability to tackle the growing competition from online drug retailers like Amazon (AMZN). Meanwhile, triggering recovery hopes, latest reports revealed that there are signs of comparable sales growth and cash flow improving in the near term. Rite Aid’s pharmacy benefit manager EnvisionRx Options continues to be a bright spot. Experts believe that finding a suitable buyer for EnvisionRx might bring the company back on track.
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