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Supermarket chain operator Safeway Inc. ( SWY ) on Thursday caught a big downgrade from analysts at Jefferies & Co.

The firm cut its rating on SWY from "Buy" to "Hold" and slashed its price target from $21 to $17. That new target suggests a smaller 6% upside to the stock's Wednesday closing price of $15.97.

A Jefferies analyst commented, "We are downgrading SWY as sales upside driven by just for U appears limited. In addition, industry fundamentals are weakening, in part due to higher gas prices and an acceleration of competitive openings, which may be compounded by a spike in food inflation. With the near-term catalysts seemingly gone, and no additional company-specific or macro drivers on the horizon, valuation remains a lone positive for the equity."

Additionally, the firm lowered its 2012 earnings estimate from $2.00 to $1.94 per share, and 2013 from $2.32 to $2.15.

Safeway shares fell 21 cents, or -1.3%, in premarket trading Thursday.

The Bottom Line
Shares of Safeway ( SWY ) have a 4.38% dividend yield, based on last night's closing stock price of $15.97. The stock has technical support in the $12-$14 price area. If the shares can firm up, we see overhead resistance around the $18-$20 price levels.

Safeway Inc. ( SWY ) is not recommended at this time, holding a Dividend.com DARS™ Rating of 3.1 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

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