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Is Rite Aid Corporation Stock Now Too Cheap to Pass Up?

What happened

Shares of the struggling pharmacy retailer Rite Aid Corp. (NYSE: RAD) took another blow last month by shedding a whopping 15.8% of their value, according to S&P Global Market Intelligence. Rite Aid's stock tanked in response to the news that e-commerce giant (NASDAQ: AMZN) was considering moving into the retail pharmacy space, which would obviously put Rite Aid under even more pressure from a competitive standpoint. 

Image Source: Getty Images.

So what

Amazon is reportedly set to make a decision on its retail pharmacy aspirations by Thanksgiving. If it does go this route, the tech behemoth could use its newly purchased Whole Foods stores as the "brick-and-mortar" component of this business, lessening the need to make any additional acquisitions. That's particularly bad news for Rite Aid because it's starting to look like an outright sale may be the only way to create value for its shareholders at this point. 

Now what

The one potential hiccup is that the high degree of government regulation in the retail-pharmacy arena may prove to be too much of a hassle for Amazon, and that's probably the main issue why the e-commerce behemoth is mulling over heading into the industry. Unfortunately for Rite Aid and its shareholders, though, the cold, hard truth is that Amazon would almost certainly decimate the company's retail-pharmacy segment through innovative pricing schemes and the use of "big data" across its various consumer segments if it did enter this space. As such, this beaten-down healthcare stock probably isn't worth buying unless Amazon takes a pass on selling prescription drugs.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.