Market Overview

The 4 Factors Affecting Fred's Shares Today

The 4 Factors Affecting Fred's Shares Today
Related FRED
36 Biggest Movers From Friday
42 Biggest Movers From Yesterday
Related RAD
Greenlight's Q4 Letter Reveals Another Tough Quarter For David Einhorn
Rite Aid Soars Too High Too Fast: Is This Justified?
Invest In Walgreens Or CVS, Speculate In Rite Aid (Seeking Alpha)

Shares of Fred's, Inc. (NASDAQ: FRED) hit a new 52-week high of $21.77 earlier this week after the company announced a blockbuster deal to buy more than 800 stores from Walgreens Boots Alliance Inc (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD) for $950 million in cash.

The deal boosted Fred's market cap from $450 million to $1.3 billion overnight as the retailer will now become the third-largest drug store chain in the United States.

The stock took a breather on Thursday and was trading lower by nearly 5 percent at $19.44. Traders and investors are attributing the selloff to four unique factors.

1. Profit Taking

Fred's stock traded above the $20 per share on Wednesday, which actually marks the highest level the stock has traded at in 10 years.

Needless to say, Fred's investors banked a massive overnight profit, and it shouldn't come as a surprise some investors are cashing out.

2. Insider Selling

Michael Hayes, Fred's chairman emeritus of the board and a former CEO of the company, disclosed in a regulatory filing that he had sold 3,243 shares of Fred's stock at an average price of $19.29.

It is not known if the executive's transaction is indicative of his opinion that the stock has reached a peak or if he wanted to free up cash ahead of the holiday season.

3. Rite Aid's Report

Since Fred's acquired hundreds of new retail locations from Walgreen's and Rite Aid, investors will be paying close attention to how these stores are performing.

Rite Aid reported early Thursday morning that it earned $0.02 per share in its third quarter on revenue of $8.1 billion. Wall Street analysts were expecting the company to earn $0.04 per share on revenue of $8.2 billion.

In addition to a top- and bottom-line miss, same-store sales for the quarter fell 3.4 percent from a year ago, consisting of a 4.7 percent decrease in pharmacy sales and a 0.4 percent decrease in front-end sales.

4. Technical Resistance At The $20 Level

Shares of Fred stalled at the $20 level on Tuesday, but once they broke through the $20 level, they soared higher by another $2 per share, marking a classic technical breakout.

Throughout Wednesday's trading session, the stock flirted with the same $20 technical level. When that level started to break down, the stock price fell to another technical level at $18 before bouncing back above $19 per share.

The $18 level serves as another important technical level, which became apparent between 9:30 and 9:50 a.m. on Tuesday when the price stalled briefly at that level.

Image Credit: By Michael Rivera - Own work, CC BY-SA 4.0, Wikimedia Commons

Posted-In: Michael HayesNews Technicals Retail Sales M&A Movers Trading Ideas Best of Benzinga


Related Articles (FRED + RAD)

View Comments and Join the Discussion!