Why This Analyst Says Rite Aid is 'So Interesting'

Jill Malandrino was recently a guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick. Tune in to the daily broadcast live Monday-Friday at 8 a.m. ET here.

TheStreet's Options Profits Product Development Manager Jill Malandrino said on yesterday's #PreMarket Prep that Rite Aid Corporation RAD is "so interesting," a result of its organic performance and speculation that it may be a takeover target. That combination, Malandrino said, could drive the stock higher following earnings.

But Malandrino said that the company is "really, really going to have to deliver on this" earnings quarter. She reminded listeners that "there's a lot of love in this stock going into the earnings print." Malandrino pointed to the fact that call buying last week outnumbered puts 4-to-1. And, she said, on May 21, TheStreet flagged a "massive block" of more than 100,000 July $9 calls being purchased.

On speculation that Rite Aid may be a takeover target, Malandrino highlighted a recent Credit Suisse report. In that report, the analysts reinstated ratings with an Outperform rating and a $10 price target on the stock, more than 10 percent above current price. She added that Rite Aid is a "pretty hot target should the industry consolidate some more."

Beyond being a takeover target, Malandrino said that Rite Aid is "so interesting" because the "company has made really great progress on its turnaround." That means that it is "doing well organically" while operating in a hot sector that is also performing well.

Estimize expects Rite Aid to report EPS of $0.07 on revenues of $6.692 billion, well above the median Wall Street forecast.

Year to date, Rite Aid has gained 19 percent, outperforming the S&P 500, up 1.8 percent, and its rival CVS Health Corp CVS, which gained 7.1 percent.