(Bloomberg) -- Rite Aid Corp. short sellers are feeling the pinch this morning after better-than-feared third-quarter results sparked a rally.
Strong gross margins were the biggest takeaway for Evercore ISI analyst Elizabeth Anderson, who rates shares at underperform and estimates the stock will be worthless in a year. Shares of the heavily-shorted company popped as much as 42% after the open, the biggest move in more than four years.
The improved sales and headline beat in earnings before things like interest and taxes “will likely cause the stock to pop today,” Anderson wrote in a note to clients. However, management's turnaround plans remain key to her view on the company, which has lost more than 90% of its value in the last five years.
Bets against the company have been slowly taken off the table since the start of the fourth-quarter, data compiled by analytics firm S3 Partners show. More than a quarter of shares available for trading are sold short, down from a peak of 37% at the start of October, according to S3 Partners.
One of the next key catalysts for investors will be the company's Analyst Day on March 16, where the company plans to share more details on its recent changes.
To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net
To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Steven Fromm
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