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Reading SuperValu’s Northcoast Research Downgrade

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Recent analyst actions on SuperValu

SuperValu (SVU) was downgraded by Northcoast Research to “neutral” from a “buy” rating on October 19, 2017. Four other brokerage houses lowered the company’s target price on the same day. RBC lowered its target for SVU to $35 from $42, while Pivotal Group lowered its target for SVU to $39 from $42.

Notably, Morgan Stanley lowered its target for SVU to $20.5 from $22.5, and Deutsche Bank lowered its target for SVU to $18 from $28.

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Wall Street’s view of SVU

The Northcoast downgrade resulted in a deterioration in SVU’s average analyst rating. The company is now rated a 2.7, compared with 2.5 before its fiscal 2Q18 results.

Of the ten analysts tracking SVU, 20% (including Pivotal Research and RBC Capital) suggest a “buy,” while 80% recommend a “hold,” including Telsey Advisory Group, Morgan Stanley, and Deutsche Bank.

Despite the increasing pessimism around SVU stock, the company does not have any “sell” recommendations.

How are peers rated?

Most competitors have a better rating score than SVU right now. Kroger (KR) and Sprouts Farmers Market (SFM) are rated 2.6 and 2.3, respectively, while Sysco (SYY) is rated a 2.5. United Natural Foods (UNFI), however, has a lower rating of 2.9.

SuperValu’s stock still has a solid upside

While SVU has seen several target price downgrades from Wall Street, its stock still appears to have a substantial upside. According to the average Wall Street analyst price estimate, the company’s stock price is likely to jump ~100% over the next year.

ETF investors interested in exposure to SVU can consider the WisdomTree SmallCap Earnings Fund (EES), which invests 0.3% of its portfolio in SVU stock.

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