Analyst Calls Bid for Rite Aid (RAD) by Walgreen (WAG) 'Highly Unlikely'

Guggenheim's John Heinbockel issued a note Thursday saying a deal between Rite Aid (NYSE: RAD) and Walgreen (NYSE: WAG) is "highly unlikely." Rite Aid shares surged more than 9 percent Wednesday amid M&A chatter. The stock continued higher during this morning's pre-market session, and very briefly during the intraday session, however shares are currently down about 4 percent to under $2.

Heinbockel believes Walgreen will simply not pay up for Rite Aid. Still the Guggenheim analyst remains optimistic on the company's fundamentals. Heinbockel boosted his FY11 EBITDA estimate for Rite Aid from $910 million to $914 million and his FY12 estimate from $968 million to $1.02 billion.

While maintaining a Buy rating, Heinbockel lifted his price target on Rite Aid shares from $1.60 to $2.25. The analyst's new price target represents potential upside of about 14 percent from where the stock is currently trading.

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