Rite Aid has plunged 50% since January. Has it hit bottom or is there still room to fall?
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Rite Aid (NYSE:RAD) shares have lost half their value since January -- a far worse performance than rival drug store chains have seen. The slide has come amid heightened concerns about the companyâs future, with some analysts predicting even more declines to come. With the company set to announce its next earnings report this week, has the stock reached a bottom or does it remain a sell at these levels?
Deutsche Bank Raises Red Flags
Since the beginning of the year, Rite Aid shares have plunged 50% while shares of competitor Walgreens Boots Alliance (WBA) have tumbled 15%. Meanwhile, fellow drug store chain CVSHealth (CVS) shares have actually advanced despite overall weakness in the market. The stock has edged up 1%, while the S&P 500 Index has slid 8%.
The latest round of selling in RAD came last week, when analysts at Deutsche Bank slashed their price target for the stock to $1 from $16. The firm also dropped its rating to Sell from Hold, citing concerns that the chain wouldnât meet its preliminary fiscal 2023 guidance of adjusted EBIDTA of at least $430M.
Ominously, Deutsche added that Rite Aid needed to generate at least $400M in adjusted EBIDTA for the year to continue operating as a company.
âAt a number below $400M the equity arguably has no value as the company is not in a position to generate real returns to shareholders,â wrote the Deutsche Bank analysts. âUnfortunately, we believe Covid has hastened the decline of the retail pharmacy segment and we see the potential for a dramatic negative inflection point for RAD shares as this preliminary F2023 outlook seems to be unattainable.â
In response to the scathing Deutsche Bank report, Rite Aid stock fell 17% in a single session, closing the day at $6.99 after reaching an intraday 52-week low of $6.11. Shares have hovered near these levels since, with the stock closing Tuesday's trading at $7.30. 
Can RAD Bounce Back or Does It Remain a Sell?
Deutsche Bank may have taken an aggressive view, but the firm's bearish take on RAD is hardly alone. In fact, Wall Street analysts, on average, rate the stock a Strong Sell. Admittedly, this consensus consists of just three analysts tracked by Seeking Alpha over the past 90 days. However, of that sample, one rated the stock a Sell and two a Strong Sell. 
Quantitative measures offer a less negative view, although they remain far from bullish. Seeking Alphaâs Quant Ratings view the stock as a hold. Given its recent stock slide, RAD earned an A+ for valuation. However, the Quant Ratings grade the drug store chain as a mediocre C+ for growth, while giving it dismal D+ and F ratings for profitability and momentum, respectively.
RAD is set for another major catalyst this week. The company is slated to roll out its Q4 earnings report and fiscal 2023 guidance this Thursday.
In December, Rite Aid issued a better-than-expected fiscal 2022 forecast, calling for revenue of $24.4B to $24.7B and adjusted EBITDA of $500M to $520M. But despite the relatively upbeat forecast, analysts have become concerned that the company wonât be able to compensate for an expected drop in pandemic-related revenue. Theyâve also questioned the health of its retail pharmaceutical business.
For more details on bearish view on Rite Aid, check out SA contributor Evin Rohrbaughâs âRite Aid: Turnaround Not Enough to Outperformâ. For a bullish take, read SA contributor Daniel Jonesâs âRite Aid: A Deep Value Play Worth Consideringâ.