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Goldman Upgrades Kroger To Buy, Unconcerned About Competition From Wal-Mart

Goldman Upgrades Kroger To Buy, Unconcerned About Competition From Wal-Mart
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The grocery business represents a mature and low-growth segment that faces relentless competition, Goldman Sachs’ Stephen Tanal said in a report. He assumed coverage of the food retailers with a Neutral view, while recommending companies like The Kroger Co (NYSE: KR) which operated in “low population density areas that are better insulated from competitive intrusion.”

Analyst Stephen Tanal upgraded the rating on Kroger from Neutral to buy, while adding the stock to the Conviction List and assigning a price target of $42, which implies 17 percent upside.

Shares Under Pressure

Kroger’s shares have lost 14 percent year-to-date. While some investors are concerned about the company facing tougher competition from Wal-Mart Stores, Inc. (NYSE: WMT), “as some believe WMT may invest more aggressively in price,” Tanal mentioned. He added, however, “We are less concerned.”

Related Link: Kroger Offers 12.6% Upside, Vetr Crowd Says

The analyst believes that Kroger’s shares already reflect slower near-term SSS and earnings, and that the “drivers and dynamics that have allowed KR to take share from WMT and others over the years remain in place.”

Long-term Prospects Bright

Tanal expressed optimism regarding Kroger’s long-term prospects, given the company’s “entrenched, multi-local dominant positioning, driving local economies of scale across the US.” Moreover, the company is no international exposure, and will not be impacted by an uncertain global backdrop.

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Latest Ratings for KR

Sep 2016JefferiesMaintainsHold
Sep 2016BarclaysInitiates Coverage onEqual-Weight
Sep 2016CitigroupMaintainsBuy

View More Analyst Ratings for KR
View the Latest Analyst Ratings

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