Morgan Stanley Downgrades Albertsons (ACI) Rating, Cuts Price Target by 30%
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 15 2026
0mins
Should l Buy ACI?
Source: seekingalpha
- Market Share Risk: Morgan Stanley analyst Simeon Gutman highlights that Albertsons faces further market share erosion by 2026, particularly as its reliance on pharmacy sales appears vulnerable amid intensifying competition.
- Pharmacy Sales Decline: The overall industry headwind in the pharmacy category, attributed to the Inflation Reduction Act and slowing GLP-1 sales, is expected to decline by 85 to 155 basis points, which could severely impact Albertsons and exacerbate its share loss.
- Intensifying Competition: With Amazon and Walmart expanding into fresh delivery, traditional retailers like Albertsons and Kroger are at risk of continued market share loss, as Gutman anticipates that the trend of “the big getting bigger” will persist.
- Rating and Price Target Adjustment: Morgan Stanley downgraded Albertsons from Equalweight to Underweight and cut its price target by 30% to $144, suggesting a 21% downside from Wednesday’s closing price, reflecting a bearish outlook on the company’s growth prospects.
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Analyst Views on ACI
Wall Street analysts forecast ACI stock price to rise
16 Analyst Rating
10 Buy
5 Hold
1 Sell
Moderate Buy
Current: 17.930
Low
17.00
Averages
22.27
High
29.00
Current: 17.930
Low
17.00
Averages
22.27
High
29.00
About ACI
Albertsons Companies, Inc. is a food and drug retailer in the United States. The Company is engaged in the operation of food and drug retail stores that offer grocery products, general merchandise, health and beauty care products, pharmacy, fuel and other items and services in its stores or through digital channels. It operates approximately 2,257 retail stores with 1,720 in-store pharmacies, 405 associated fuel centers, 22 dedicated distribution centers and 19 manufacturing facilities. The Company operates stores across 35 states and the District of Columbia under 22 banners, including Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, ACME, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen, Carrs, Kings Food Markets and Balducci's Food Lovers Market. Its own brands include Signature SELECT, Open Nature, Lucerne, Waterfront BISTRO, Signature Reserve and Value Corner, among others.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Advertising Innovation Test: Albertsons Companies participates in the OpenAI Ad Pilot Program, aiming to provide more relevant and personalized advertising experiences through ChatGPT, which is expected to enhance consumer shopping convenience and brand value.
- Valentine's Day Marketing Strategy: Ahead of Valentine's Day, Albertsons ads will appear in ChatGPT, allowing consumers to see local store ads when searching for related terms, thereby increasing the effectiveness and targeting of holiday shopping.
- Customer Engagement Boost: By testing ads in ChatGPT, Albertsons aims to enhance engagement with new customers while building meaningful connections with existing ones, driving sales growth and customer loyalty.
- AI Technology Integration: Albertsons has embedded AI technology across various enterprise levels, launching the Albertsons AI shopping assistant and AskAI, with early data showing significant increases in customer engagement and basket growth.
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- Clear Use of Proceeds: The proceeds from this offering will be used to redeem $1.35 billion of 4.625% senior notes and $750 million of 5.875% senior notes, which is expected to significantly alleviate the company's debt burden and improve financial flexibility.
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See More
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- Advertising Innovation Test: Albertsons Companies participates in the OpenAI Ad Pilot Program, aiming to provide more relevant and personalized advertising experiences through ChatGPT, which is expected to enhance consumer shopping convenience and brand value.
- Valentine's Day Marketing Strategy: Ahead of Valentine's Day, Albertsons ads will appear in ChatGPT, allowing consumers to see local store ads when searching for related terms, thereby increasing the effectiveness and targeting of holiday shopping.
- Customer Engagement Boost: By testing ads in ChatGPT, Albertsons aims to enhance engagement with new customers while building meaningful connections with existing ones, driving sales growth and customer loyalty.
- AI Technology Integration: Albertsons has embedded AI technology across various enterprise levels, launching the Albertsons AI shopping assistant and AskAI, with early data showing significant increases in customer engagement and basket growth.
See More
Uber Eats Launches AI Shopping Assistant to Compete with Instacart
- AI Shopping Assistant Launch: Uber Eats has introduced the Cart Assistant, an AI tool that can automatically add items from handwritten shopping lists or recipe screenshots to online shopping baskets, displaying prices and promotions, thereby enhancing user shopping experience and customer loyalty.
- Intensified Market Competition: The launch of Cart Assistant intensifies competition between Uber Eats and Instacart, with Instacart's gross transaction value nearing $40 billion annually, while Uber's retail business is projected to reach a $12 billion annual run rate by 2025, highlighting the significant potential in the retail market for both companies.
- Technological Investment Edge: Uber's substantial investment in AI allows it to keep pace with Instacart technologically; while Cart Assistant may not be a game changer, it strengthens Uber's competitive position across its diversified platform, particularly in transportation and food delivery.
- Ongoing AI Applications: Uber is leveraging AI not only in the shopping assistant but also in driver matching, route optimization, and dynamic pricing, and is expected to continue investing in AI to better meet customer needs and drive business growth.
See More
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Market Trends: The market is experiencing a pullback, creating opportunities for contrarian investors as many individual stocks are down significantly, suggesting a potential for selective buying strategies.
Investment Strategies: Jeff Clark emphasizes the importance of identifying oversold stocks and sectors, particularly in software and grocery chains, while advising caution against popular trades like gold mining stocks.
Bitcoin Sentiment: Current bearish sentiment around Bitcoin contrasts sharply with previous bullish trends, with Clark suggesting that today's prices may be more attractive for investment compared to past highs.
Contrarian Opportunities: Clark highlights that emotional market conditions often present unique investment opportunities, particularly in sectors that are currently undervalued or overlooked.
See More
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- Low Industry Valuations: Excluding giants like Walmart and Costco, Kroger Company (KR) trades at 12.7x forward earnings estimates, significantly below the S&P 500, indicating a cautious market sentiment reflected in the grocery sector's average valuation of just 11.3x.
- Stagnant Revenue Growth: Over the past five years, revenues at major grocery chains have barely budged, with inflation-adjusted figures showing declines; Kroger's net income margin is projected at only 2.1% for FY 2026, while Albertson's (ACI) is even narrower at 1.4%.
- Emerging Market Opportunities: Sprouts Farmers Market (SFM) is forecasted to achieve approximately 10% revenue growth in FY 2026 with a net income margin of 5.7%, highlighting its competitive edge in the natural and organic food sector against traditional grocers.
- Attractive Options Strategy: Given SFM's recent weak stock performance, investors can sell cash-secured puts to earn about 5% returns; if the stock remains above $65 by expiration, profits are realized, while a drop allows acquisition at a discount, showcasing the appeal of value investing.
See More
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- Amazon's Strategic Shift: Amazon's decision to close its Fresh and Go brick-and-mortar stores marks a significant pivot in its grocery strategy, resulting in a more than 1% rise in its stock during midday trading, while rivals Kroger and Albertsons saw declines of about 3%.
- Micron's Expansion Investment: Micron Technology has commenced construction of an advanced wafer fabrication facility at its existing NAND manufacturing plant in Singapore, with a planned investment of approximately $24 billion over the next decade, leading to a roughly 5% increase in its stock price.
- Sysco's Earnings Beat: Sysco reported earnings that exceeded expectations, with a fiscal second-quarter EPS of $0.99 compared to the $0.98 anticipated by analysts, resulting in a 9% stock price increase and an updated full-year guidance at the higher end of $4.50 to $4.60 per share.
- UnitedHealth Stock Decline: Shares of UnitedHealth and Humana dropped about 20% after the Centers for Medicare & Medicaid Services proposed a mere 0.09% increase in 2027 Medicare Advantage payment rates, significantly lower than the expected 4% to 6% rise.
See More
Albertsons Companies Prices $1.2 Billion Senior Notes Offering to Redeem Debt
- Debt Restructuring Plan: Albertsons announced the pricing of $1.2 billion in 5.625% senior notes, expected to close on February 2, 2026, which will help optimize the company's capital structure and reduce future interest expenses.
- Clear Use of Proceeds: The proceeds from this offering will be used to redeem $1.35 billion of 4.625% senior notes and $750 million of 5.875% senior notes, which is expected to significantly alleviate the company's debt burden and improve financial flexibility.
- Positive Market Reaction: Following the announcement, Albertsons' stock rose 0.11% in after-hours trading to $17.2, indicating investor approval of the company's debt management strategy.
- Optimistic Long-Term Outlook: This debt restructuring not only allows Albertsons to lower interest expenses but also provides more financial room for future expansion and investments, strengthening its position in the highly competitive grocery market.
See More
