Market Overview

2 Grocery Outlet Analysts Remain Sidelined Despite Praising Q3 Print

Share:
2 Grocery Outlet Analysts Remain Sidelined Despite Praising Q3 Print

Two Grocery Outlet Holding Corp (NASDAQ: GO) analysts had plenty of praise for the extreme value grocery chain's third-quarter report, but fell short of recommending the stock to investors.

The Analysts

UBS analyst Michael Lasser maintains a Neutral rating on Grocery Outlet  with a $38 price target.

Bank of America analyst Robert Ohmes maintains at Neutral, unchanged $40 price target.

UBS: 'Solid' Quarter

Grocery Outlet's "solid" print includes certain metrics among "the finest results" in the entire consumable retail space, Lasser wrote in a note. For example, same-store sales growth accelerated by 150 basis points on a two-year stack to 5.8% from a combination of traffic and ticket growth.

Gross margins were also 38 basis points higher in the quarter due to opportunistic purchasing, improved efficiencies, product delivery savings and inventory management improvements. It may be difficult to sustain gross margin expansion over time, but the company's exposure to the secondary channel offers a form of protection from pressures its competitors face.

Grocery Outlet's stock is trading at around 40 times 2020 estimates, which Lasser said implies investors aren't "pricing in a meaningful slowdown" in the near term. As such, shares offer a "balanced" risk-reward profile at current levels.

BofA: 'Firing On All Cylinders'

Grocery Outlet's business is "firing on all cylinders" as the company saw broad-based strength across all regions and product categories, Ohmes wrote in a note. Behind the scenes, management deserves credit for solid expense controls and initiatives to improve inventory.

The company continues to see a large supply of product availability which can grow to as much as four times its current size, the analyst wrote. Multiple bullish catalysts, including a differentiated business model, extreme customer value proposition, a path to establish 4,000 stores in the U.S., and expectations for comps to come in above current guidance of 1% to 3% are already "well-appreciated by investors" at current levels.

Related Links:

Grocery Outlet Holding IPO: What You Need To Know

Analysts Remain Sidelined After Grocery Outlet's 'Impressive' Quarter

Latest Ratings for GO

DateFirmActionFromTo
Nov 2020Morgan StanleyMaintainsEqual-Weight
Aug 2020DA DavidsonInitiates Coverage OnBuy
Aug 2020Morgan StanleyMaintainsEqual-Weight

View More Analyst Ratings for GO
View the Latest Analyst Ratings

 

Related Articles (GO)

View Comments and Join the Discussion!

Posted-In: Bank of America Grocery Michael Lasser retailersAnalyst Color Earnings News Analyst Ratings Best of Benzinga

Latest Ratings

StockFirmActionPT
CMGGoldman SachsInitiates Coverage On1,650.0
WINGGoldman SachsInitiates Coverage On165.0
MCDGoldman SachsInitiates Coverage On237.0
SBUXGoldman SachsInitiates Coverage On115.0
DPZGoldman SachsInitiates Coverage On425.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com