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Rite Aid Stock Rattled After Analyst Cuts Price Target to $1

The company will report fourth-quarter earnings next week

Deputy Editor
Apr 7, 2022 at 10:12 AM
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Rite Aid Corporation (NYSE:RAD) stock is crumbling today, down 22.5% to trade at $6.54, after a downgrade from Deutsche Bank to "sell" from "hold," with a price-target cut to $1 from $16. The analyst in coverage is skeptical on the company's preliminary 2023 outlook, and says the pandemic "hastened the decline of the retail pharmacy segment." Now, all three analysts in coverage carry a "sell" rating on Rite Aid.

This bear note comes a week ahead of the company's fourth-quarter earnings report, due out before the open on Thursday, April 14. Ahead of the event, the options pits are pricing in a post-earnings swing of 24.5%, which is much higher than 16.5% move the stock has averaged over the last eight quarters. Of these reports, only three post-earnings sessions finished positive, including a 21.4% upswing this past December. 

Options bulls are likely unhappy with this development. In the past five weeks, 5.73 calls have been bought for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 97% of readings from the past year, indicating long calls being picked up at much faster-than-usual rate during this time. 

Today, options traders are targeting Rite Aid stock straight out of the gate. So far, 2,904 calls and 6,632 puts have crossed the tape -- 23 times the intraday average. The April 6.50-strike put is the most popular, with new positions being bought to open there. RAD has also landed on the short sale restricted (SSR) list today. 

On the charts, the shares are trading a fresh two-and-a-half year lows. Rite Aid stock breached recent support at the $8 level right out of the gate, and is headed for its biggest daily percentage drop since March 2020. year-over-year, RAD is down 68%. 

 

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