UPDATE: Morgan Stanley Initiates Coverage On SuperValu, But Sees 10% Downside

In a report published Tuesday, Morgan Stanley analyst Vincent Sinisi initiated coverage on SuperValu SVU with an Underweight rating and $7.00 price target, suggesting more than a 10 percent downside. Sinisi noted that SuperValu will likely cede share in the retail food industry and will likely report flat retail sales. The analyst wrote, "The Food Retail and Independent businesses look particularly challenged. As such, we expect SuperValu's retail banners to lose share within the food at home market. While Save-A-Lot growth appears to be re-accelerating under new management, we wait to see evidence of sustainable growth trends." Morgan Stanley forecasts sales to continue to decelerate at (one) percent annually in the Independent segment. The analyst sees 2013 to 2016 estimated EPS CAGR of 5.7 percent versus consensus at 6.9 percent. SInisi has a $0.64 2015 EPS estimate, $0.03 below consensus. Shares of SuperValu closed at $7.81 on Tuesday.