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Wall Street Expects Supervalu Stock to Rise 25% in 2017

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Jan. 10 2017, Updated 7:37 a.m. ET

Stock market performance of grocers this year

US grocery retailers were in troubled waters in 2016 as a result of persistent deflation and rising competition. Most food retailers like Supervalu (SVU) are seeing softening sales and margin pressures, which have forced them to lower guidance.

As a result, all the major supermarket chains have been in the red for the last one year. Supervalu, Kroger (KR), Sprouts Farmers Market (SFM), and Whole Foods Market (WFM) have lost 27.8%, 19%, 7%, and 27.2% of their values, respectively, over the last one-year period.

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What can SVU’s investors expect now?

Supervalu’s investors have been hit particularly hard as the company’s share price dropped 31% in 2016 after having lost 30% of its value in 2015. Currently, SVU is trading 40% below its 52-week high price.

However, Wall Street seems to be positive on Supervalu’s stock. Analysts are expecting a 25% rise in SVU’s stock price over the next 12 months. The company, which is currently trading at $4.8 (as of January 5, 2017), has been assigned a target price of $6.00.

SVU has a better upside as compared to peers. Share prices of Kroger and Sprouts Farmers are predicted to rise 8% and 23% over the next 12 months, respectively. Whole Foods is, however, likely to witness a further decline of ~2%, according to Wall Street.

Dividends

Companies pay dividends to enhance total investor returns. Kroger and Whole Foods are regular dividend-paying companies among the US supermarkets. SVU, however, doesn’t offer dividends, which further depresses its investor returns as compared to dividend-paying companies.

ETF investors seeking to add exposure to SVU can consider the iShares Morningstar Small-Cap Value ETF (JKL), which invests 0.23% of its portfolio in the company.

Read the next part of the series to know about Wall Street’s view on SVU.

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