GO - Grocery Outlet falls after Morgan Stanley turns bearish

Morgan Stanley lowered its rating on Grocery Outlet Holding ( NASDAQ: GO ) to Underweight from Equal Weight with the stock called priced for perfection.

The firm warned on downside risk to the consensus estimates for GO 2023 estimates and thinks the +40% YTD rally has pushed valuation to an uncomfortable level.

"The stock has gotten ahead of its fundamentals and seems priced for perfection, which drives a negative risk/reward skew and ~20% downside to our $33 PT (up from $29 post Q2 results)," noted analyst Simeon Gutman.

Despite a benefit from grocery consumers seeking value, profit flow-through for GO is expected to be muted due to low incremental margins.

Morgan Stanley assigned a price target of $33 to GO vs. the 52-week trading range of $21.01 to $46.37.

Shares of Grocery Outlet Holding Corp. ( GO ) fell 4.91% in premarket trading to $39.69.

See all the valuation metrics on GO.

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