Mizuho: We're Still Buying Rite Aid

• The share price of Rite Aid Corporation RAD has declined more than 13 percent over the last one month.
• Mizuho’s Ann Hynes has maintained a Buy rating and price target of $10 on the company.
• Hynes believes that the pullback in the stock is overdone and that the recent weakness in the shares offers an attractive buying opportunity.

The recent selloff in the stock was earnings related, according to the Mizuho report, following the company lowering its guidance.

“We would highlight that the midpoint of adjusted EBITDA guidance remained unchanged despite lowering drug store and same-store sales expectations for the year,” Hynes stated.

“Although scripts trends are tracking below expectations, profitability/script is higher resulting in a relatively neutral impact to earnings,” the report added.

Hynes also highlighted that the revised revenue guidance did not assume that trends would decelerate in 2HFY16. In fact, the guidance suggests that trends would remain unchanged in the second half of the year.