Stock investment – Why Rite Aid, Bristol-Myers Squibb, and TransDigm Group Slumped Today — The Motley Fool



Stock investment

Friday was a positive day for the stock market. The Dow Jones Industrials climbed by 95 points and there were similarly modest advances for the S&P 500 and Nasdaq Composite. The inauguration of the 45th president of the U.S. commanded the attention of many, both on and off Wall Street today, but many market participants pointed to the day’s gains as a natural bounce after five straight days of losses for the Dow.

With the broader market waiting for more clarity on the political and economic outlook looking ahead to the rest of the year, many investors looked to individual stocks rather than the market, as a whole. Among the worst performers today were Rite Aid (NYSE:RAD), Bristol-Myers Squibb (NYSE:BMY), and TransDigm Group (NYSE:TDG). Below, we’ll look more closely at these stocks to tell you why they did so poorly.


Image source: Rite Aid.

Rite Aid investors fear FTC rejection

Rite Aid plunged 13% in the wake of reports that the Federal Trade Commission might oppose its proposed merger with Walgreens Boots Alliance (NASDAQ:WBA). Rite Aid had hoped that its proposal to sell 865 of its drugstore locations to Fred’s (NASDAQ:FRED) would be enough to satisfy the FTC, but skeptics are concerned that Fred’s might not have the capacity to provide ample competition to Walgreens and CVS Health if the Rite Aid merger happens. After today’s drop, Rite Aid trades at a 17% discount to the proposed $9 per-share buyout price, and that shows just how scared investors are that the deal won’t go through as planned.

Bristol-Myers Squibb slows down

Bristol-Myers Squibb dropped 11% after saying late Thursday that it would not seek an accelerated regulatory review from the U.S. Food and Drug Administration for its proposed combination therapy for lung cancer. Many investors had hoped that the combination of its Yervoy and Opdivo drugs would prove effective enough to spur Bristol to look for fast-track approval, especially in light of the FDA approval of a key competitor’s drug for lung cancer.


Nevertheless, Bristol didn’t give details in its release, leaving many to speculate that the treatment’s effectiveness might not have been as high as they had hoped. Now, investors will have to wait to see Bristol’s next move.

TransDigm loses altitude

Finally, TransDigm Group lost 10%. The aerospace components and systems supplier found itself the target of short-selling research firm Citron Research and analyst Andrew Left, whose report suggested that the company might be “the Valeant of the aerospace industry.” In particular, the report capitalized on criticism that President Trump has attributed to Boeing and Lockheed Martin, suggesting that the pricing practices that TransDigm uses could be even more egregious.

Citron’s valuation of the stock wasn’t quite as dire as some of its past calls have been, suggesting that the shares might be worth $166. Yet that’s still more than 25% lower than where TransDigm closed today, and it will be interesting to see if the new president takes note of the attack from Left.

– Stock investment

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