Is it time to cash out Albertsons shares as BMO issues a call to sell?

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.

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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.

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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