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PreMarket Prep Stock Of The Day: Kroger

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PreMarket Prep Stock Of The Day: Kroger

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

On PreMarket Prep, we discuss issues that will will either benefit or be hurt by the COVID-19 crisis. The obvious potential beneficiaries include pharma or biotech companies that are working on developing testing kits, vaccines or even a cure — and perhaps some hospital supply companies.

Unfortunately, the list of companies being devastated by the crisis is extensive. Just about every sector of U.S. economy is feeling the impact, with airlines; cruise lines; sports and entertainment venues; and retail, including restaurants, suffering the most.

The closure of many restaurants has forced people to eat at home. As a result, people are making more trips to the grocery store. One popular grocery store that people are flocking to is Kroger Co (NYSE: KR). Let's take a look at the PreMarket Prep Stock Of The Day.

Benzinga is covering every angle of how the coronavirus affects the financial world. For daily updates, sign up for our coronavirus newsletter.

Trend Not Your Friend Since 2016

While the broad market moved higher from January 2016 until to mid February, Kroger went in the opposite direction.

After making its all-time-high in December at $42.75, it sunk to $19.69 in October and attempted to rebound. The issue revisited the area when it bottomed again in August 2019 and embarked on a sustained rally.

The primary reason for the extended decline in the low-margin business was the invasion of Amazon.com, Inc. (NASDAQ: AMZN), with the acquisition of Whole Foods, and other online competition.

Vote Of Confidence From Warren Buffet

Before the market meltdown began, on Feb. 18, Warren Buffett announced that he had acquired a $549-million stake in the company. The 19-million-share position put

Berkshire Hathaway Inc. (NYSE: BRK-A) (NYSE: BRK-B) among the top 10 of shareholders of the country's largest supermarket operator.

In the buying frenzy of grocers at the onset of COVID-19 crisis, Kroger rallied all the way to $36.84 on March 19, but quickly gave back all those gains.

The issue came all the way down to the area it was before the Buffett announcement when it bottomed on March 25 at $27.33 before rebounding to end the session at $29.

Recent Kroger Price Action

The issue did not participate in last week's rally at all, falling from $31.08 to $29.13 on Friday.

On Wednesday, the company reported a "significant greater lift" in sales over the last month.

Kroger raised first-quarter sales guidance and reaffirmed its FY 2020 guidance.

The stock was trading 2.69% higher at $30.93 at the time of publication.

Kroger Moving Forward

Shareholders of Kroger are in pretty good company with Buffett on their side. Of course, any further investment from the Berkshire Hathaway CEO will be met with another round of short- and long-term buying. 

More importantly, it is impossible to guarantee that, when this crisis ends, people will assume their regular spending habits — especially on luxuries such as dining out. 

Public domain photo via Wikimedia. 

 

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