Mizuho: Time To Buy Rite Aid

In a report published Wednesday, Mizuho analysts initiated coverage of

with a Buy rating and price target of $10. "We believe successful turnaround and capital restructuring efforts have set the stage for future growth through store refresh efforts, the expansion of healthcare services offerings, the refinancing of high-cost debt, and M&A," the analysts said. The analysts believe that the potential share price catalysts include operating margin expansion, market share gains, potential future M&A and sustained optimization of the company's capital structure. The company's efforts to achieve a turnaround have led to earnings growth, driven by rationalization of its underperforming stores, remodeling of stores, cost control and balance sheet improvement. "We think RAD is in the fifth inning of a successful operational and financial turnaround strategy," the Mizuho report stated. In addition, the company has expanded its healthcare services with the acquisition of three healthcare services companies in the last 18 months. The analyst expect these acquisition to "drive store traffic, build customer stickiness and better position the company to the changing healthcare landscape." The analysts also believe that Rite Aid is an attractive M&A candidate, with

being a likely bidder. "Given lackluster retention rates, we think ESRX needs to make strategic moves to better position the company competitively to regain lost market share," the analysts added.