UPDATE: Goldman Sachs Reiterates Neutral Rating, Raises PT on Rite Aid Corporation
In a report published Friday, Goldman Sachs Group reiterated its Neutral rating on Rite Aid Corporation (NYSE: RAD), and slightly raised its price target from $1.35 to $1.50.
Goldman Sachs noted, “Because RAD operates with enormous operating and financial leverage, a modest change in margins can deliver an outsized impact to its share price. The current surge in generic profitability is aiding the entire sector, but delivering the biggest benefits to RAD, as 3Q12 results beat forecasts on a spike in gross profit led by generics. We believe these developments are enabling a higher level of investment in stores and service, bringing RAD closer to a virtuous cycle that would enable it to upgrade its operations and pave a path to sustained profitability. Our confidence in this scenario is mitigated by our view that some factors driving accelerating earnings growth are peaking, including the impact of generics on margin and earnings growth from scripts gained during WAG's impasse with ESRX.”
Rite Aid Corporation closed on Thursday at $1.21.
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