Goldman Sachs Upgrades Rite-Aid (RAD) to Buy; More Room to Run

March 12, 2014 7:04 AM EDT
Get Alerts RAD Hot Sheet
Price: $10.57 -5.96%

Rating Summary:
    5 Buy, 8 Hold, 3 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 25 | Down: 19 | New: 35
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Goldman Sachs upgraded Rite-Aid (NYSE: RAD) from Neutral to Buy with a price target of $8.00 (from $5.00) saying they still see room to run in recovery story.

Analyst Robert P. Jones said, "Despite the 80% move in the stock (vs. S&P 11%) since September 2013, we still see upside in the company's turnaround. Two key elements to the story are store remodels and balance sheet deleveraging, and the expanded agreement with MCK should allow for the acceleration of one or both."

He added, "Importantly, on its core outlook, we see stronger comp growth ahead, which should only be compounded by RAD’s higher exposure to states that expanded Medicaid (65% of stores vs. 47% for CVS and 54% for WAG; analysis within). On valuation, RAD screens relatively in-line with its peer average on EV/EBITDA, but we believe the value of its NOLs (PV of $1.6bn on its balance sheet) should be factored in. Treating the NOLs as cash, RAD trades at 8.1x NTM EV/EBITDA, vs. CVS/WAG 9.3x/10.4x."

For an analyst ratings summary and ratings history on Rite-Aid click here. For more ratings news on Rite-Aid click here.

Shares of Rite-Aid closed at $6.44 yesterday.


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