This afternoon we are moving Albertsons (ACI) from BUY to SELL.
Albertsons’ shares continue to surge well past our 23 price target. Recent catalysts include more encouraging news that removes much of the pension overhang, strong earnings that point to more build-up of excess cash, and continued concerns over Covid that will help drive consumers back to grocery stores.
Yesterday, the company announced that highly regarded executive Sharon McCollam will be joining Albertsons as president and chief financial officer. One of her notable accomplishments was helping drive the turnaround of Best Buy as CFO. The shares traded up 17% yesterday to close at 29.05.
In our optimistic valuation scenario looking out three years, we can justify only an incrementally higher share price from here for Albertsons. The valuation is approaching parity with Kroger (KR). We recognize the value that McCollum brings as well as the other fundamental improvements underway – but these are mostly already factored into the share price.
Albertsons shares produced an approximate 90% return since our August 2020 recommendation.