Kroger Stock Drops as Analysts Shift From Albertsons Over Deal Uncertainties

Kroger Stock

Kroger stock was trading at $41.85 as of 01:05 PM EDT.

Many Wall Street experts told clients to stay away from the company shortly because the merger between Kroger (NYSE:KR) and Albertsons Companies (NYSE:ACI) is likely to be closely watched by regulators for a long time.

Guggenheim analyst John Heinbockel downgraded the shares from “Buy” to “Neutral” on Monday. He said that the next 18 months could be rough. He explained that the all-cash nature of the transaction would probably keep the shares in a trading range below the estimated $27.25 price when accounting for the special dividend.

In a similar way, Rupesh Parikh, an analyst at Oppenheimer, said that investors would be smart to wait until the regulatory review period is over. On Monday, he said to clients, “On the fundamental front, risks persist, in our view, connected to a more challenging macro backdrop and now potentially more management turnover during the acquisition approval process.” “Lastly, a regulatory review could take at least four to five quarters, which would take away a clear N-T positive catalyst for the shares. We should also say that we don’t know what the original IPO investors, like Cerberus and others, want to do with their money, which could lead to more selling after the lockup period.

Kroger stock forecast

The two analysts had different opinions about Kroger’s future course (NYSE:KR). Guggenheim rated the stock as “Outperform,” while Oppenheimer gave both names a Hold-equivalent rating.

“We remain to BUY rated but are dropping our price objective from $57 to $50, which is based on 5.8x (from 6.6x) projected 2023E EBITDA, reflecting the near-term economic uncertainty while viewing the LT merits of the ACI merger positively,” Heinbockel said in his conclusion. On Friday, the stock prices of Albertsons Companies (NYSE:ACI) and Kroger (NYSE:KR) both dropped significantly as investor excitement for the proposed merger waned. In a note to clients about the purchase, Wells Fargo analyst Edward Kelly added to the arguments of those who didn’t think the deal was a good idea.

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