Rite Aid (RAD) may not be able to sustain itself for the long term, according to a Deutsche Bank analyst.

The negative outlook came from George Hill on Thursday, who suggested that the struggling drugstore and pharmacy retailer may not be in business much longer as he slashed Rite Aid’s price target to $1 from $16 and marked his rating of the stock as sell, according to Business Insider.

Hill’s report also went on to say that Rite Aid might go under as it has $3.2 billion in debt after an aggressive expansion plan that didn’t pan out and may not generate enough cash to stay viable.

“We see a likely risk that the company provides guidance next week that causes investors to question the company’s ability to sustain itself as a going concern, leading to a sharp reduction in the value of Rite Aid shares,” Hill’s analysis of Rite Aid said, as reported by Yahoo Finance.

Shares of Rite Aid tanked 24% to $6.45 upon news of the report from Hill. At market close on Thursday, they were down over 17% to $6.99, recovering to $7.10 in premarket trading in the early morning hours on Friday.

Rite Aid will release its 2023 guidance on April 14, which Hill said he sees the retailer falling short of its goal of its annual adjusted EBITDA, according to Yahoo Finance.

Rite Aid’s previous 2022 guidance indicated an adjusted EBITDA of $500 million to $520 million, including funding from COVID vaccines and tests, which Deutsche Bank doesn’t believe the company can meet.

“Unfortunately, we believe COVID has hastened the decline of the retail pharmacy segment and we see the potential for a dramatic negative inflection point for Rite Aid shares as this preliminary fiscal 2023 outlook seems to be unattainable.”

Rite Aid was part of the federal government’s Federal Retail Pharmacy Program, administering COVID tests and vaccines.

“The core pharmacy business needs to roughly double next year to achieve the target of north of $450 million in F2023, which we think is highly unlikely, especially with sharply lower COVID contribution. We estimate RAD could miss the $430 million bogey by more than $100 million, calling the value of the equity into question,” as reported by Business Insider.

As of Friday's premarket hours, Rite Aid was trading at $7.14, up 15 cents, or 2.15%.

Rite-Aid
Rite Aid released its 2014 fourth quarter and fiscal year earnings on Wednesday. The drugstore chain showed a rise in same store sales of 4.5 percent in the most recent quarter and expects growth to continue at a clip of 2.5 to 4.5 percent in the coming year. Reuters/Noah Berger
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