Honestly, I feel for Rite Aid Corporation (NYSE:RAD) shareholders. A little over two years ago, Walgreens Boots Alliance Inc (NASDAQ:WBA) announced it would buy the company for $9 per share. Less than a year ago, the RAD stock price was not far below that level, as investors seemed confident the deal would go through.

Since then, it’s been nothing but bad news for RAD stock, which has slipped below $2 per share. And that’s even with a modified version of the deal going through, with Rite Aid still getting a purchase price of some $4.7 billion, including a $325 million termination fee stemming from the original agreement.

It’s been an awful run for RAD stock, but that doesn’t necessarily mean Rite Aid stock is cheap. I still believe, as I argued last month, that it can get worse. RAD bulls are betting on one of two outcomes. And I don’t believe either is likely.

Door #1: A Takeover

The fundamental case for RAD stock at this point rests largely on the per-store value ascribed to the chain in the Walgreens deal. The price paid by Walgreens suggests the remaining stores are worth at least $2 million apiece, enough to support a share price easily over $4, more than double current levels.

It’s a case that makes sense in theory. But with Rite Aid’s net proceeds much lower than the price (due to taxes and payments for accrued liabilities), and with the EnvisionRx PBM business almost certainly worth much less than the $2.1 billion Rite Aid paid for it back in 2015 the numbers aren’t quite as clean as some bulls suggest.

The numbers aside, the larger problem is in practice. Who exactly is supposed to acquire Rite Aid? CVS Health Corp (NYSE:CVS) isn’t going to go through the same antitrust wringer that Walgreens did, and it reportedly is interested in merging with health insurer Aetna Inc (NYSE:AET), which would leave it busy for years. Fred’s Inc (NASDAQ:FRED) originally was going to buy some Rite Aid stores, but its stock has plunged. The company now is worth less than $200 million and is barely profitable on an Adjusted EBITDA basis. It can raise neither the stock nor the debt to acquire Rite Aid, which still has an enterprise value over $4 billion pro forma for the revised Walgreens deal.

There is one acquirer, though, that RAD bulls have repeatedly cited recently.

Rite Aid’s Savior

The one name constantly cited by bulls is Amazon.com, Inc. (NASDAQ:AMZN). That company reportedly is interested in the pharmacy space. It recently acquired Whole Foods Market, showing its interest in a brick-and-mortar presence. Amazon could buy Rite Aid to accelerate its entry into pharmacy, right?

But such a deal just doesn’t make much sense. Whole Foods had just under 500 locations. Rite Aid, post-Walgreens, will have nearly 2,600. There seems little need for Amazon to add that many locations especially with  the complexity required to run the front ends of those stores.

More broadly, by all accounts Amazon sees an opportunity for streamlining the prescription business, including driving mail-order sales. The plan here is to go around pharmacies like Rite Aid and Walgreens, not through them.

There’s a reason WBA stock is trading near its lowest levels in nearly three years, and PBM Express Scripts Holding Company (NASDAQ:ESRX) just bounced off a four-year low. The industry looks challenged, with Amazon one of those challenges. Amazon is trying to upend the industry, not join it.

Door #2: A Business Improvement

So if Rite Aid doesn’t get bought out, its business needs to improve. Adjusted EBITDA has declined 32% in the first half of fiscal 2018, with the drop almost 40% in the pharmacy business. Comparable front-end sales have declined for four straight quarters. Same-store prescription revenues are down for five straight quarters, falling 4%+ in each of the last four.

Rite Aid’s profits are falling sharply, and if a takeover doesn’t happen the stock no longer looks cheap. Trailing twelve-month figures suggest a pro forma EV/EBITDA multiple of about 6.8x. But assuming similar declines in the second half, that number moves to 8x – and the leverage ratio moves to a dangerous 4.5x or higher.

The profit declines have to be stopped, but the question is how. Rite Aid already is reeling. Sales are declining and margins are getting squeezed. Walgreens is closing nearly 600 of the Rite Aid stores it is acquiring because those stores are more valuable closed than open. The same very well may be true of some of the stores Rite Aid is keeping.

Again, Rite Aid has time to turn its business around. But what’s less clear is whether it has the ability. Competition is intense. Drug prices are coming down. Labor costs are rising. And the company likely will have ~$4 billion or so in operating lease commitments even after the Walgreens deal. It can’t just shut down unprofitable stores without paying significant lease termination fees.

Overall, there’s a sense that RAD bulls are looking backwards, not forwards. Yes, Walgreens paid good money for roughly 2,000 stores. That doesn’t mean the remaining 2,575 are worth the same amount. Yes, the RAD stock price was near $9. That doesn’t mean it’s going back. This is a declining business in a tough space. Expecting its stock to rise means either an acquirer has to show up or the business has to improve. I don’t see much evidence suggesting a positive outcome on either front.

As of this writing, Vince Martin has no positions in any securities mentioned.