Kroger's stock upgraded despite Albertsons deal uncertainty
- Jefferies upgraded Kroger's stock to buy from hold, raising its price target to $73 per share.
- The grocery chain's stock price has increased by over 31.6% year to date, and just gained 1% following the upgrade.
- Analysts are divided on Kroger, with nearly half holding a buy rating despite legal challenges regarding the Albertsons acquisition.
On December 3, 2024, Jefferies upgraded Kroger's stock from hold to buy, indicating positive potential for the grocery store chain even amid uncertainties surrounding its proposed acquisition of Albertsons. This decision follows a history of Kroger's attempts to acquire Albertsons, which began in 2022, ultimately leading to regulatory scrutiny due to concerns that the merger might lead to higher consumer prices. Regulatory bodies initiated a lawsuit against the merger earlier in 2024, signaling a critical moment for both companies. Jefferies analysts, particularly Rob Dickerson, expressed that despite the legal hurdles, Kroger's operations have shown signs of improvement in recent months, underpinned by beneficial food trends and financial management. Dickerson emphasized that should the deal not go through, Kroger would still benefit from approximately $6 billion in debt incurred for the acquisition, which could be leveraged for share buybacks, thereby enhancing stock value. The report added that Kroger's adeptness in managing costs in a low-margin sector positions it favorably moving forward, whether the merger is finalized or not. The stock reacted positively, gaining 1% in premarket trading immediately following the upgrade, and has seen a year-to-date increase of over 31.6%. Overall, the analyst community reflects a varied perspective on Kroger, with almost half of the analysts rating it as a buy or strong buy, while the others maintain hold ratings, indicating a split view on the company's future amidst ongoing developments.