In general, Thursday was an open day for the stock market. But you wouldn't know that from the performance of two veteran stock exchanges, the pharmacy chain operator Rite Aid (NYSE: RAD) and long-standing technical stock favorite Oracle (NYSE: ORCL) .
The former hit the stock price with 21% plus, while the latter dropped 4% on the day. Let's look at what happened to the couple and whether these price declines provide opportunities for purchase.
Rite Aid: The Dangers of an Analyst Downgrade
One of the biggest stock lines was Rite Aid, the pharmacy chain director. Investors wasted the shares after influential Deutsche Bank initiated coverage on the stock.
It goes without saying that the investment bank was not exactly bullish on the company's outlook. Deutsche Bank analyst George Hill beat a sell rating on the stock to a price target of $ 5.00 per share ̵
Hill cited a number of factors in the analysis of the downturn, including what he considers to be a questionable reliance on regional health plans and pressure from reimbursement for drug prescriptions.
For several years, the market as a whole has not been stagnant compared to Rite Aid, except for some brief stretches of optimism. An unsuccessful merger between it and the Walgreens Boots Alliance announced in 2015 resulted in a disappointing sale of over 1,900 Rite Aid stores to Walgreens. A subsequent planned acquisition of supermarket chain operator Albertsons also flopped.
So Rite Aid these days is smaller, and lacks the prominence and power of his larger peers. Although some of the operational and financial metrics have increased in the recent past, the company is still struggling to raise revenue and mop red-ink pools on the bottom line.
That said, the American population is getting older. This should have positive knock-on effects throughout the broader health care system. Skilled operators in niches like the pharmacy segment can take advantage of the opportunity.
But as it now appears, Walgreens and other major pharmaceutical players in this game are better positioned than the weakened Rite Aid to do so. So perhaps Deutsche Bank's strong outlook on the stock is not entirely justified, but it highlights many reasonable concerns for the company. Rite Aid does not look like an opportunistic purchase even with the steep fall in prices.
Oracle results, CEO hiatus weighs on emotion
The overwhelming reason for Oracle's Thursday decline was quarterly results, mixed with some potentially worrying news from the C-suite.
Oracle's Q1 revenues were not as high as the average analyst estimate ($ 9.22 billion was the result, against expected $ 9.29 million). The non-GAAP (adjusted) net income was more or less in line with expectations, but at $ 2.76 billion ($ 0.81 per share).
Perhaps more worrying was the unexpected news that co-CEO Mark Hurd is temporarily retiring because of what the company vaguely described as "health-related causes." Investors tend to favor stability and consistency in the results of the companies, especially when they have been big cheeses in the industry for several years. Such is the case with Oracle.
What also doesn't help is Oracle's reliance on large share buybacks, which for some feel like gimmicky and expensive ways to give goose per share. In its first release, the company said it has authorized another $ 15 billion for the purpose.
Still, diving feels like an overreaction to recent events. Oracle is still doing well after its long transition to a cloud-based service provider. It has made several smart acquisitions in potentially high growth segments, and it has the capital, experience and customer base to take advantage of the opportunities presented. I would definitely consider buying Oracle on this decline.
This article was originally published on Fool.com.
All figures are quoted in US dollars unless otherwise stated.
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Eric Volkman has no position in any of the listed shares. Motley Fool has no position in any of the shares listed. The Motley Fool has a disclosure policy.