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The WBA-RAD Merger and the 43% Fall in Rite Aid Stock

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Uncertainty of the merger is killing Rite Aid stock

Uncertainty over closing the proposed merger between Walgreens Boots Alliance (WBA) and Rite Aid (RAD) has been a kick in the stomach to Rite Aid shareholders. Rite Aid stock has fallen a whopping 42.8% year-to-date (YTD).

Fred’s (FRED), which agreed to buy Rite Aid’s divested stores, has also fallen 21.0% YTD. Walgreens, however, seems to be unaffected by the merger delay, and its stock has risen 2.3% to date.

As we saw in the previous parts of this series, the Walgreens-Rite Aid merger still hasn’t obtained regulatory approval.

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Can RAD and FRED stock rebound?

Wall Street is looking for a rebound in Rite Aid stock and Fred’s stock. The two stocks are likely to rise 39.0% and 30.0%, respectively, over the next year.

Rite Aid stock, which is currently trading at $4.71, has a price target of $6.54. Walgreens has offered $6.50–$7 to Rite Aid shareholders.

Walgreens stock is likely to rise 12.0% over the next 12 months. It’s trading at $84.63, which is 4.0% below its 52-week high price.

Wall Street’s view on WBA and RAD

Walgreens is tracked by 25 Wall Street analysts. Together, they’ve rated the company a 2.0 on a scale of 1.0 for “strong buy” to 5.0 for “sell.” In comparison, Rite Aid, which is covered by eight analysts, has been given a rating of 2.6, reflecting its not-so-strong fundamentals.

About 76.0% of Walgreens analysts are recommending a “buy” for the stock, and 24.0% are recommending a “hold.” Only 38.0% are recommending a “buy” for Rite Aid, while the remaining are recommending a “hold.” None of the analysts have recommended a “sell” for either company.

If you’re seeking to add exposure to WBA or RAD, you could consider the First Trust Consumer Staples AlphaDEX ETF (FXG), which invests 5.1% of its combined portfolio in the two companies.

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