Rite Aid Stock Keeps Churning In A Tight Channel

Drugstore chain Rite Aid Corporation (NYSE: RAD) is the largest chain on the East Coast and the third-largest in the U.S. The stock is up 32.2% in 2021, with its 320-day moving average serving as a stable floor since April. However, RAD is a far cry from its Jan. 28 annual high, and the stock has only cleared its 80-day moving average once on a closing basis since April. In other words, the shares have spent the last two months trading in a tight range. 

Rite Aid RAD stock news and analysis

The company is scheduled to report first-quarter earnings later this month on June 24. So far, Rite Aid has outperformed Wall Street's earnings expectations on three of its last four quarterly earnings reports. This has included post-earnings bull gaps of 17.4% in December and a 26.6% pop back in June. Overall, the stock averages a post-earnings move of 19.3% in the last eight reports, regardless of direction.

Should the stock gap higher later this month, a short squeeze could keep the wind at its back. Almost 15% of RAD's total available float is sold short, and at the stock's average pace of trading, it would take shorts nearly four days to buy back their bearish bets.

RAD Stock Chart

Fundamentally, Rite Aid is not in great standing despite experiencing significant revenue growth in the company's most recent fiscal year. For fiscal 2021, RAD grew revenues by 9.4% and added over $360 million to its net income. However, the big improvements were not enough for Rite Aid to finish its fiscal year in profitable territory, as the company reported $90.9 million in net losses for the year.

In addition, Rite Aid has stayed inconsistent in net income growth over recent years, to say the least. They currently have $6.43 billion in total debt on its balance sheet compared to only $160.9 million in cash, which doesn’t provide much hope for the company’s future growth. Overall, Rite Aid stock could be construed as a gamble for potential investors, even as a turnaround play.

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