On Tuesday, Albertsons Companies Inc. (NYSE:ACI) shares declined by 2.54% after BMO Capital Markets downgraded the stock to underperform from market performance. Analyst Kelly Bania cited Albertsons’ weak margins as a concern amid a price-sensitive consumer environment.
The analyst also set a price target of $26.00 per share, implying a discount of more than 13% from Monday’s closing price. The grocery store chain faces significant industry headwinds with consumers becoming more sensitive to pricing.
The ACI stock is up more than 70% this year and over 110% over the last 12 months.
Is it time to cash out?
From a valuation perspective, Albertsons shares still trade at an attractive forward P/E ratio of about 12.50, making the stock an exciting option for value investors. However, analysts expect its earnings to fall by 11.70% this year and decline at an average annual rate of 10.57% over the next five years.
Therefore, growth investors could opt for alternatives in the market. Moreover, with shares already up more than 70% this year, value investors could find it more rewarding to take profits while the price is still high.
Source – TradingView
The decline may not be over
Technically, ACI shares appear to have recently plummeted to complete a downward breakout from an ascending channel formation. However, the stock is far from reaching oversold conditions, thereby leaving room for more declines.
As a result, investors could target extended pullback profits at approximately $27.74, or lower at $26.00. On the other hand, if the stock unexpectedly bounces back, it could find resistance at $30.92, or higher at $32.40.
It is not too late to sell
In summary, although Albertsons shares are down 12.50% since reaching an all-time high of $34.09 on 7th September, the stock is yet to reach oversold conditions.
Moreover, despite its exciting valuation multiple of 12.50 forward P/E, its earnings could decline substantially in the coming quarters. Therefore, it may be best to cash out while the stock price is still high.
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