Sunday, April 13, 2014

Jefferies Initiates Coverage on Safeway at “Hold” (SWY)

On Monday, Jefferies announced that it has initiated coverage on Safeway Inc. (SWY).

The firm has started coverage on SWY with a “Hold” rating and $32 price target. This price target suggests a 1% upside from Monday’s closing price of $31.49.

Analyst Mark Wiltamuth noted: “In June/July, Safeway valuation was in a confused state with the core grocery business trading at only 4.0x EV/EBITDA after adjusting for the recent Canada sale and removing Blackhawk value/”

“With the arrival of an activist, valuation has now reached 5.1x. Marking to market, we believe Safeway needs to turn around declining EBITDA to move the stock from here. We’re not convinced the company’s three sales initiatives will do it.”

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Safeway shares were mostly flat during pre-market trading Tuesday. The stock is up 74% YTD.

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