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Safeway Started as a “Sell” at Deutsche Bank (SWY)

Supermarket chain operator Safeway Inc. ( SWY ) on Thursday saw its coverage initiated with a "Sell" rating by analysts at Deutsche Bank.

The firm also set a $15 price target on SWY, suggesting a nearly 17% downside to the stock's Wednesday closing price of $17.99.

A Deutsche analyst commented, "While all traditional grocers face considerable secular challenges, Safeway's issues have yet to be reflected in either Street estimates or its premium multiple. Said differently, the combination of stiff competition in California and Canada along with its unsustainably high GPM meaningfully exposes EPS to the downside. With this in mind, we are modeling EPS compression in FY12 versus the Street's overly optimistic view of ~11% growth. Finally, we can't understand why SWY enjoys a premium P/E vs. Kroger ( KR )."

Safeway shares were unchanged in premarket trading Thursday.

The Bottom Line

Shares of Safeway ( SWY ) have a 3.22% dividend yield, based on last night's closing stock price of $17.99. The stock has technical support in the $16-$17 price area. If the shares can firm up, we see overhead resistance around the $20 price level.

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 .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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