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Rite Aid, Walgreens Added to Deutsche's 'Catalyst Call Buy' List

Deutsche Bank views the prospects for both drugstore chains positively but Rite Aid shares plunged anyway after it offered weak earnings estimates.
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Rite Aid  (RAD)  and Walgreens Boots Alliance  (WBA)  added to Deutsche Bank’s “Catalyst Call Buy Idea” list Thursday, but Rite Aid's shares plunged anyway after it offered weak fiscal 2021 earnings estimates after the close on Wednesday.

Deutsche Bank analyst George Hill lifted his share price target for Rite Aid to $27 from $17 as he anticipates that the weakness of drugstore chains will reverse in the near-to-medium term, Bloomberg reports. Hill kept his hold rating, however.

Rite Aid recently traded down 20% to $18.67. But it has soared 113% over the past six months through Wednesday, as consumers return to stores with the COVID pandemic subsiding.

Indeed, Covid vaccines should offer Rite Aid a boost, Hill said. With the coronavirus morphing to other strains, that could mean more and regular demand for vaccines in the future.

As for earnings projections, for the fiscal year ended Feb. 27, Rite Aid now expects adjusted earnings before interest, taxes, depreciation and amortization to range from $425 million to $435 million. In December, the Camp Hill, Pa., company had estimated adjusted Ebitda at $490 million to $520 million.

As for Walgreens Boots Alliance, Deutsche Bank added the drugstore chain to its Catalyst Call Buy Idea list for similar reasons as its Rite Aid addition, Bloomberg reported. Hill boosted his price target for Walgreens to $55 from $49, but also maintaining his hold rating.

Walgreens recently traded at $50.73, down 2.0%.

The company’s stock jumped in late January, after it named departing Starbucks  (SBUX)  executive Rosalind Brewer as its new CEO. Jefferies maintained its hold rating on its shares but called Brewer "an impressive CEO hire," according to Bloomberg, due to her track record in the consumer sector.