Rite Aid Corporation (NYSE: RAD) is emerging as a competitor in the pharma retail sector by offering healthcare services and retail products to more than 1 million customers daily across 17 states. After reporting its Q1 financials, RAD stock witnessed increased momentum leading the stock to climb 34%. With this in mind, RAD stock is emerging as one of the hottest Reddit plays due to its potential short squeeze. While it remains to be seen if a short squeeze materializes, investors are bullish on RAD stock and its new found popularity.
RAD Stock News
Operating a retail drugstore chain across the US, RAD operates through two segments allowing it to compete with giants like Walgreens and CVS. The first segment is Retail Pharmacy where RAD sells prescription drugs and provides other pharmacy services. Its other segment is Pharmacy Services which RAD uses to offer a suite of pharmacy benefit management (PBM) services like technology solutions, network and rebate administration, as well as pharmacy discount programs through Elixir. At the same time, Elixir provides drug benefits under the Medicare Part D program and insurance offerings.
Elixir
Through Elixir, RAD has a market opportunity of more than 2 million covered lives – including 700 thousand from its Medicare Part D insurance offerings. With this in mind, Elixir could be pivotal for RAD’s future prospects as it has the potential to become a leader in the PBM market since it lowers healthcare costs through consumer engagement. Following through on this target, RAD has several strong network contracts and a new rebate aggregator. Through these efforts, Elixir would be able to deliver high value services at a much lower price than its competitors Walgreens and CVS.
By using Elixir for white label PBM services, RAD appears to be on track to further grow its business and secure a significant share in this highly competitive market. For this reason, RAD is currently developing a new direct-to-consumer platform which the company intends to launch this summer.
Considering the potential of this PBM service, RAD has been working to develop Elixir as it looks to follow through with its transformation plan. In light of this, Elixir sold 80 thousand lives so far this year even though it is the beginning of the sales season. Based on this, Elixir has the potential to witness major success in the PBM market which is dominated by Walgreens and CVS.
Business Expansion
As the company is looking to modernize its retail pharmacy business, RAD intends to open small apothecary-like shops in underserved areas to make pharmacists more accessible for patients. Since these targeted areas do not have a pharmacy within 5 miles, RAD is positioning itself to become the sole healthcare provider in such areas – allowing the company to gain a wider customer base. To facilitate this expansion, RAD closed 145 stores to focus on expanding in more rural areas. Since rural areas are often reliant on services in their vicinity, this strategic decision could pay off for RAD down the line.
Delivering on this new focus, RAD partnered with Homeward to provide access to healthcare for people living in rural areas across the US. As is, this partnership is expected to connect underserved seniors with clinical services providers. Through this partnership, RAD will introduce its Medicare eligible customers to Homeward’s clinical services which could attract new customers to RAD.
At the same time, RAD will host Homeward’s mobile car units at rural Michigan locations for underserved communities. This is in line with RAD’s vision of improving healthcare in rural communities while also expanding its reach across the nation. Given that 60 million Americans live in rural areas, RAD stock could be on a trajectory for major growth as this partnership expands.
RAD also has plans to expand into adjacent markets as it intends to open test stores in Indiana, West Virginia, and Upstate New York over the coming months. By expanding in these lucrative markets, RAD could be on track for further financial growth in the future as it rolls out its transformation plan.
Digital Expansion
With the company looking to become a modern pharmacy, RAD plans to expand its chat services to meet the demand for digital services. Currently, RAD provides 40 thousand pharmacy chats to its rewards customers every year allowing its members to chat with RAD’s pharmacists throughout the day. Meanwhile, RAD’s health coaching service – Health Dialogue – offers chats with licensed nurses at night to provide immediate assistance.
RAD intends to hire more pharmacists to expand this service while also adding on to it to include video chat. Based on these efforts to improve its digital presence, RAD stock could be looking to capitalize on the shift towards telehealth services triggered by the pandemic.
On that note, RAD partnered with Afterpay – the leader in Buy Now, Pay Later services. Based on this partnership, RAD will offer its online shoppers the option to pay for their items in four installments at no additional cost. Moreover, customers will get access to Afterpay’s advance budgeting tool which would allow them to spend responsibly on goods.
Although RAD will initially allow Afterpay on online purchases, the company intends to roll out this payment option in all of its stores over the coming months. Considering that the majority of Afterpay’s users are Gen Z and Millennial users, RAD has the potential to bring in new customers and capitalize on more sales.
In light of all these efforts to transform the company into a modern pharmacy, RAD’s CEO Heyward Donigan promised shareholders that “the next two years, you’re going to see really meaningful, new, creative opportunities, innovation, and expansion coming out of our organizations”. With this in mind, Donigan also promised that some of these plans will be announced over the coming months. These announcements could help prolong RAD stock’s run as more investors look to get in on the stock. For these reasons, RAD stock was valued at $125 by Simply Wall Street – offering a huge upside for the stock from its current PPS.
RAD Stock Short Squeeze
However the main driver behind RAD stock is its potential short squeeze. Currently RAD stock’s short interest is 22% according to Fintel with a dark pool volume of 59.76%. Given that there are only 750 thousand shares available to short at the time of this article, RAD stock could be the new Redbox Entertainment Inc. (NASDAQ: RDBX) short squeeze.
RAD Stock Financials
According to its latest Q1 report, RAD has $8.5 billion in assets including $56 million in cash and has $8.5 billion in liabilities. Meanwhile, the company’s revenues declined over the same year-ago period to $6 billion. As a result, RAD reported a net loss of $110.1 thousand compared to $13 thousand in Q1 2021.
The report also highlighted that RAD was able to increase its prescriptions by 1%, even though the company had 3 million fewer Covid-19 vaccines than last year. Based on these numbers, RAD believes that acute prescriptions increased by around 12% – which is a significant number for a company like RAD. Despite the declining revenues and the growing net loss, RAD appears to be in a solid place financially as it has no debt due until 2025.
Technical Analysis
RAD stock is currently trading at $7.96 and has supports at 7.91, 7.01, and 6.47. It also shows resistances near 8.70, 9.56, in addition to 10.27. Although the stock gained nearly 90% this month, RAD stock dropped near its support recently. However the company had a number of interviews over the past week which could provide the spark for higher highs this week.
With this in mind, bullish investors should look for the support to hold before adding to their position as the stock recently dropped below its VWAP. If the stock drops below its support, RAD could retest its support near $7 which could be a good entry point. If the stock gains more interest from Reddit, making RAD stock one to watch in the coming weeks.
In light of RAD’s run near $9, accumulation is on a steep downward trend as investors take profit. At the same time, the MACD recently turned bearish. The RSI also cooled off from 84 to 53. Since these indicators are resetting, RAD stock could be poised for a strong run especially if short interest increases.
RAD Stock Forecast
As the company is looking to compete with other major players in its market, RAD appears to be well-positioned to achieve this target through its efforts at transformation. With Elixir providing white label PBM services at a lower cost than Walgreens and CVS, RAD has the potential to attract more users to its PBM platform. In addition, RAD’s partnership with Homeward is positioning the company to expand its offerings across the nation as it is targets underserved seniors living in rural communities. At the same time, partnering with Afterpay has the potential to help the company accrue more money in sales from Afterpay’s userbase.
In the short-term, RAD stock could be a solid play if momentum builds for a short squeeze. With this in mind, bullish investors could take a starter position to not miss out on the potential squeeze but it will take more interest from retail investors for RAD to achieve the same run as RDBX or other meme stocks.
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