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Why Shares Of Rite Aid Are Down By 25% Today?

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Rite Aid Video 25.03.21.

Rite Aid Stock Tumbles After Company Cuts Guidance

Shares Of Rite Aid found themselves under strong pressure after the company provided an update on its fiscal year 2021 guidance. The company noted that its fourth-quarter results were significantly impacted by weak cough, cold and flu season while challenging weather conditions served an an additional negative catalyst.

As a result, the company expects that its fiscal 2021 net loss will be between $90 million and $100 million. EBITDA guidance was cut from $490 million – $520 million to $425 million – $435 million.

The market is clearly disappointed with the guidance cut as the stock gained strong downside momentum and is down by about 25% in today’s trading session.

It should be noted that shares of Rite Aid were up by almost 50% in 2021 before this day so the market did not expect negative news from the company.

What’s Next For Rite Aid?

Analysts expect that the company will report earnings of $0.42 per share in 2022, so the stock is currently trading at 41 forward P/E which is expensive. At the same time, it should be noted that Rite Aid stock was previously trading at an even higher valuation as the market believed that a successful transformation is possible, and the company’s earnings power would grow materially after 2022.

It remains to be seen whether traders will use the current sell-off as an opportunity to buy Rite Aid stock at lower levels. Typically, the market is very nervous when a company whose stock gained a lot of ground in recent months cuts its guidance.

At the same time, problems with cold weather and weak cough, cold and flu season may not be repeated next time, while COVID-19 vaccinations may become regular, providing a long-term boost to the company’s earnings. If the market buys into this story, shares may quickly find support and rebound closer to recent levels.

For a look at all of today’s economic events, check out our economic calendar.

This article was originally posted on FX Empire

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