Nevertheless, investors should be positive on the deal as Rite Aid is now in a better position it would have been if no deal had been made, Cowen's Charles Rhyee commented in a research report. There are many benefits from the transaction, including deleverage, lower generic procurement costs, greater leverage toward in the pharmacy benefit manager space and increased financial flexibility.
Focus On PBM
After divesting many of Rite Aid's retail stores, the PBM segment will now account for a greater amount of overall sales and profitability, the analyst continued. This will naturally benefit Rite Aid from a valuation point of view as PBM companies typically trade at a premium versus drug dealers.
Also, top- and bottom-line growth of the slimmer Rite Aid company will improve given the higher growth profile of the PBM segment, which is growing at a faster pace versus the overall retail space.
Shares of Rite Aid remain Outperform rated with an unchanged $4.70 price target.
At last check, shares of Rite Aid were down 4.67 percent at $2.76. Related Links:
Fred's Is The Big Loser In The Rite Aid-Walgreens Deal 22 Stocks Moving In Friday's Pre-Market Session _______ Image Credit: By Ildar Sagdejev (Specious) - Own work, GFDL, via Wikimedia Commons© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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