Safeway (NYSE: SWY) Upgraded to Buy at Citigroup

Citigroup said on Monday it was upgrading Safeway's

SWY

rating from Neutral to Buy. The price target on shares goes from $22 to $26. Citigroup says, “We are upgrading SWY to Buy, from Neutral, based on: 1) topline growth driven by Just For You (J4U), a return to eating at home, and pharmacy share gains; 2) gross margin expansion from moderating inflation, falling gas prices, and reduced shrink; and 3) continued cost discipline. We believe valuation is attractive as the stock is trading at a 7.9x multiple on our 2013 EPS estimate of 2.34, vs. our 11x target and SWY's 10-year median of 12.1x.” SWY currently trades at 18.79, up 2.2% from Friday's $18.39.

Our SWY play: Long

This Buy rating represents a turn to the bullish for the SWY sentiment across sell-side research firms. Over 75% of analysts are rated the equivalent of Netural or Sell on the SWY issue
The new ~12-month price target represents a ~38% upside to SWY's current market valuation. A 1-2 month holding period could produce as much as 6% return. While shares are already up ~2%, there is plenty of upside left
SWY shares have faced significant downside pressure following the latest quarterly earnings at April's end. Oversell may be looking to reverse, and this upgrade is as good as any

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