Join our Waitlist for Expert Advice!

Institutions Put Bottom In Rite Aid Shares Rite Aid Corporation is on the cusp of bottoming and may already have its lowest price, if the institutions start buying again the stock could double.

By Thomas Hughes

This story originally appeared on MarketBeat

MarketBeat.com - MarketBeat

Institutions Put Bottom In Rite Aid Shares

The institutions have helped to indicate a bottom in Rite Aid Corporation (NYSE: RAD) shares, not so much because of their buying but the opposite. The institutions had been heavy buyers all year despite the downturn in the price action, but that changed in Q4. In Q4 a broad array of sell-side institutions began selling in earnest and what appears to be capitulation.

Capitulation because it just so happens the FQ3 2023 earnings report is better than expected and has the stock up strongly because of it. Add in the higher-than-average 16.5% short interest, and there is a chance this stock could see a very big pop in the near term. The question for investors is whether this bottom can hold and where the market will go. As it is, the institutions own about 60% of the stock; if they start buying again, Rite Aid shares could easily double over the next few months.

Rite Aid Is Coming Out Of The Woods

Rite Aid has been struggling with growth and profitability for a long time, but it appears to be coming out of the woods. The Q3 results are not without their negatives, but the general take is that business is better than expected, the outlook remains favorable, and losses are narrowing due to company efforts.

The $6.08 billion in revenue is down YOY, but that is against a very tough comp; the takeaway is that revenue beat the consensus by 230 basis points and the strength carried through to the bottom line in spades. On a segment basis, the pharma segments shrank versus last year due to a decline in COVID testing but all other categories improved.

Turning to the margin and earnings, margins remain negative due to restructuring charges and investment in the turnaround, but there is good news to be had. The first is that net losses came in less than expected and resulted in adjusted EPS of -$0.14. This is $0.17 better than expected, and the guidance calls for more of the same. Regarding the guidance, the company lowered its targets for revenue and raised the outlook for capital losses in F2023 but to levels that are still above the consensus. There is an expectation for positive FCF as well.

"In addition, we are kicking off a performance acceleration program, which allows us to fast-track initiatives that will improve sales, script volume and operating margins and free up cash. We look forward to updating you on our progress at year-end," said Heyward Donigan, president and chief executive officer

The Analysts May Help Rite Aid Bottom

Not many analysts are rating Rite Aid now, and that statement is an opportunity. Only two current ratings were going into the Q3 results, and they had the stock pegged at Reduce with a price target that implied fair value at pre-release price levels. Now, with the results better than expected and the outlook brightening, the analysts may begin to take notice. The best-case scenario would include some upgrades and increased price targets, but any positive commentary and attention will help put a solid floor in the price action.

The Technical Outlook: Rite Aid Is Bouncing From Historic Lows

The price action in Rite Aid shares hit a historic low ahead of the Q3 release but began to bounce even before the news was released. Now, the stock is up more than 10% off that bottom and showing signs it will continue moving higher. The next major hurdle is the short-term EMA near $5; if the market can get above that level, a move up to the $6 and then the $7 level could easily follow.

Institutions Put Bottom In Rite Aid Shares

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Side Hustle

At 16, She Started a Side Hustle While 'Stuck at Home.' Now It's on Track to Earn Over $3.1 Million This Year.

Evangelina Petrakis, 21, was in high school when she posted on social media for fun — then realized a business opportunity.

Health & Wellness

I'm a CEO, Founder and Father of 2 — Here Are 3 Practices That Help Me Maintain My Sanity.

This is a combination of active practices that I've put together over a decade of my intense entrepreneurial journey.

Business News

Remote Work Enthusiast Kevin O'Leary Does TV Appearance Wearing Suit Jacket, Tie and Pajama Bottoms

"Shark Tank" star Kevin O'Leary looks all business—until you see the wide view.

Business News

Are Apple Smart Glasses in the Works? Apple Is Eyeing Meta's Ran-Ban Success Story, According to a New Report.

Meta has sold more than 700,000 pairs of smart glasses, with demand even ahead of supply at one point.

Money & Finance

The 'Richest' U.S. City Probably Isn't Where You Think It Is

It's not located in New York or California.

Business News

Hybrid Workers Were Put to the Test Against Fully In-Office Employees — Here's Who Came Out On Top

Productivity barely changed whether employees were in the office or not. However, hybrid workers reported better job satisfaction than in-office workers.