The Walgreens Boots Alliance Inc. (NASDAQ: WBA) and Rite Aid Corp. (NYSE: RAD) merger has been the subject of much controversy over whether the deal actually will go through. Analysts have taken the perspective that this deal might be too difficult to call correctly, and those covering it generally have created two scenarios about what could happen.

24/7 Wall St. has examined a recent report from Jefferies that has a fairly optimistic view on Walgreens, win, lose, or draw on the deal. Note that the firm did not actually upgrade Walgreens, but it still took a very positive perspective that the stock could see even more upside, with or without its pending acquisition. Even though this sounds mercurial, the upside is still there.

For some quick background: Walgreens has given the Federal Trade Commission (FTC) until July 7 to reach a decision on the pending merger. The companies would be free to merge following this date, unless the FTC files a lawsuit challenging the deal.

Jefferies maintained its Buy rating for the stock with a $95 price target. Compared with an $80.16 prior closing price, the target implies upside of 18.5%.

The firm believes that as we approach the Walgreens self-imposed deadline for completing its pending Rite Aid acquisition, Jefferies has come to the conclusion that out-year earnings per share (versus the street) should go up from current levels, regardless whether the Rite Aid acquisition closes. If the FTC blocks the deal, the firm expects Walgreens to put through a sizable share repurchase. If the deal is approved, Jefferies continues to expect EPS accretion beginning in the 2018 calendar year.

Jefferies stated its case for FTC approval:

While it is admittedly difficult to handicap the odds of an FTC approval of the pending WBA-RAD transaction, we believe it’s safe to assume that an approval would come with the requirement to divest >1,000 stores. We’ve updated our RAD accretion estimates as a result of the new merger deadline of July 31st and we now estimate that the $1 billion synergy opportunity translates to $0.47 in EPS accretion by fiscal 2020, or 7% EPS accretion. Looking longer-term, we estimate that bringing Rite Aid up to 80% of Walgreen’s store productivity could add another $0.41 to EPS.

On the other hand, if the Rite Aid acquisition is blocked by the FTC, Jefferies does not expect Walgreens to challenge the decision, and management likely will pivot capital deployment toward share repurchases. If Walgreens raises its share repurchase authorization to $5 billion (which Jefferies believes is reasonable given its free cash flow outlook and the excess cash it has generated since the Rite Aid deal was announced) the firm believes that the company could increase earnings by $0.17 per share (3%) and $0.46 per share (7%) in fiscal 2018 and fiscal 2019, respectively.

Jefferies concluded:

Finality on RAD issue will serve as clearing event and WBA stock should once again trade based on its improving growth/fundamentals. Given our view that there is little Rite Aid contribution baked into Walgreens shares at current levels, we believe short-term downside in reaction to a deal blockage would be fairly modest and that a buyback increase would quickly provide support to the stock. Combining Walgreens’ currently below-average PE/G valuation and the elimination of the overhang related to the Rite Aid deal (which should shift the investment story back to its improving fundamentals), we see Walgreens shares going higher in the next few months.

Shares of Walgreens were last seen at $83.10 on Friday, with a consensus analyst price target of $93.50 and a 52-week trading range of $76.26 to $89.69.

Rite Aid shares traded up over 4% at $3.68, in a 52-week range of $3.32 to $8.77. The consensus price target is $6.19.

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