Kroger shares could pop 25% as higher food prices drive stronger earnings, Bank of America says
There's more upside in Kroger shares as elevated food prices boost the grocery chain's earnings, according to Bank of America. BofA on Friday upgraded Kroger to a buy rating from neutral. The firm also raised its price target on the stock to $75 from $61. The new projection implies 25% upside from Kroger's closing price Thursday. "We expect broad-based inflation to increasingly drive consumers to retailers with more variety (good, better & best options) as individuals shift part of their consumption towards value (while still seeking premium items in other areas)," BofA's Robert Ohmes said. Food prices in February rose 7.9% from the year prior, according to the Bureau of Labor Statistics . Ticket inflation for supermarkets is up 8% since mid-February, according to BofA. BofA believes Kroger can pass on those increased costs to customers. "We see US consumers accepting the bulk of price increases given US avg. hourly earnings up," Ohmes said. Shares of Kroger are up 32.3% in 2022, versus the S & P 500's 5.6% decline during the same period. Kroger shares also gained more than 1% in the premarket —CNBC's Michael Bloom contributed reporting.

Kroger is opening automated warehouses around the country to build a larger and more profitable online grocery business. Kroger