What Happened?
Shares of discount grocery store chain Grocery Outlet (NASDAQ:GO) jumped 2.9% in the morning session after BofA Securities upgraded the company to Buy from Neutral and raised its price target to $15 from $12.50.
BofA Securities analyst Robert Ohmes upgraded the rating to Buy from Neutral and raised his price target to $15 from $12.50, implying approximately 37% upside, Ohmes wrote in a note to clients. Ohmes pointed to an improving risk-reward profile driven by better access to attractively priced opportunistic merchandise and newly launched in-store price parity on third-party delivery platforms including DoorDash, Uber Eats, and Instacart. Ohmes added that Grocery Outlet is moving past SAP enterprise software disruptions that compressed operating margins and pushed adjusted earnings per share down from a peak of $1.07 in 2023 toward an estimated trough of $0.55 in 2026. BofA based its updated target on seven times estimated 2027 enterprise value to EBITDA to better align the stock with food retail peers.
After the initial pop, the shares cooled down to $11.26, up 2.8% from the previous close.
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What Is The Market Telling Us
Grocery Outlet’s shares are quite volatile and have had 18 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The biggest move we wrote about over the last year was 7 months ago when the stock dropped 28% on the news that the company reported disappointing fourth-quarter 2025 financial results and provided a weak forecast for 2026.
The discount grocer's adjusted earnings of $0.19 per share and sales of $1.22 billion both fell short of analyst expectations. Additionally, a key performance metric, same-store sales, was flat year on year. The outlook for the upcoming year was particularly concerning for investors. The company's full-year revenue guidance of $4.66 billion at the midpoint was 5.4% below estimates, and its adjusted earnings per share guidance of $0.50 at the midpoint missed analyst projections by a substantial 38.6%. Overall, the combination of missed Q4 targets and a sharply lower-than-expected forecast for the year ahead drove negative investor sentiment.
Grocery Outlet is up 10.7% since the beginning of the year, but at $11.26 per share, it is still trading 31.7% below its 52-week high of $16.47 from October 2025. Despite the year-to-date gain, investors who bought $1,000 worth of Grocery Outlet’s shares 5 years ago would now be looking at only $521.79.
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