The Resurrection of Rite Aid

Bank of America Merrill Lynch initiated coverage of Rite Aid Corporation RADwith a Buy and an $11 price target on the stock. Despite prior struggles, Robert Willoughby from BofA Merrill said that Rite Aid's "growth is improving" and that the company has returned to acquisitions as a "driver." Rite Aid has also benefited from Walgreens Boots Alliance Inc WBA "ill-conceived dispute" with Express Scripts Holding Company ESRX, which helped Rite Aid get sales from prescriptions.

Willoughby applauded Rite Aid's return to profitable growth with its base of "refurbished stores," noting that the company is "leveraging its pharmacy network with strategic acquisitions." In total, Rite Aid is "an attractive financial engineering story," BofA Merrill said.

Part of that story, the analysts mentioned, is the opportunity to reduce debt and refinance other obligations, lowering the company's cost of capital. Over the next several years, Rite Aid will improve its equity value and potentially "refinance or call debt prematurely."

The company still faces risks that resemble other health care providers, as well as "competitive retail challenges." Willoughby said that the "onus" is on Rite Aide to "grow prescription volumes," cut operating costs and reduce interest expenses. In total, the company "must execute well" on its efforts, including the ability to find new revenue streams through acquisitions.

Rite Aid gained 1.2 percent today on the bullish note. For the year, the stock has added nearly 20 percent, making the gains since January 2014 at 77 percent.