Diamonds and Dogs

10/27/15

Rite Aid (RAD) is the diamond today soaring 40% to $8.50 a share on rumors Walgreens will make an offer to buy the drug company for $10 billion. The deal would combine the second and third largest drug-store operators, intensifying the already fierce competition with CVS Health. The tie up would mark a tectonic shift in the market as pharmacy operators grapple with the rapidly changing health-care industry. CVS has 58% market share in the pharmacy and drug store business, Walgreens controls 31% and Rite Aid has 10%, according to research firm IBISWorld. The industry has $263 billion in annual revenue and $10.3 billion in profits. For Rite Aid shareholders, let's hope the deal is true.

GrubHub (GRUB) is the dog of the day down 23% following disappointing earnings. The online food order and delivery company, reported third-quarter profit and revenue below market expectations hurt by higher costs and service disruptions. During the third quarter, the company faced service outages in the quarter as it moved to a new technology platform. They blamed "dry weather" for being a drag on revenue. GrubHub typically sees a surge in orders during colder weather.  The fourth-quarter isn't looking any better as forecasted revenue will miss analysts' estimates. At least they didn't say their dog ate their profits.