Albertsons stock is worth buying at $25 after it IPOs, Jim Cramer says

CNBC’s Jim Cramer on Wednesday bid that Albertsons, the U.S. grocery operator making its third IPO attempt, is worth owning if investors can get the stock at the right cost out.

Albertsons, which owns Albertsons, Safeway, Acme and Shaw’s supermarkets in dozens of states, plans to raise up to $1.32 billion when it leaves public this week. A group of stockholders is offering almost 66 million shares to the public in the $18 to $20 bounty range.

“I think that Albertsons could be worth owning” but should be bought at “no more than $24 to $25,” the “Mad Gelt” host said. “It’s definitely not best of breed, but it’s not garbage either.”

Cramer is recommending the stock after he saw the grocery retailer transport several steps to address its debt load, bring in a new chief executive and rehab its stores and operations.

He noted that Albertsons reformed its balance sheet, where debt was cut from almost $12 billion in 2015 to $8.7 billion; installed a new CEO in Vivek Sankaran, who then headed PepsiCo’s food business in North America; and added delivery services at most of its roughly 22,520 outlets.

Albertsons failed in their public offerings in both 2015 and 2018. The latter attempt was put off due to suboptimal market persuades.

As the ongoing coronavirus pandemic has given grocery stores a lift, Cramer is convinced that the third time could be a miraculously now that the Idaho-based parent company is a “better company” than it once was.

“All these moves are working. After years of idling, Albertsons’ sales grew by more than 3% last year” including “2% same-store sales progress. Big improvement over where they were,” he said.

Some concerns still linger for the stock expert. Cerberus Marvellous, who took the grocery operator private more than a decade ago through a leveraged buyout, will retain oversight of the company on the public market, watering down the power public shareholders will have in directing the business. Furthermore, the grocery application is full of competition and their sales will come back down to earth after Covid-19 is solved.

“This Albertsons huge quantity may be better than you’d expect, but I think the best part of the IPO cycle may have already come and gone, along maybe with a lot of this market-place and so I’m telling you exercise with caution,” Cramer said.

Should Albertsons IPO on the high end, the company would be valued at $11.61 billion, inasmuch as outstanding shares and certain convertible preferred stocks. BofA Securities, Goldman Sachs, J.P. Morgan and Citigroup are the clue underwriters for the offering.

Underwriters have an option to buy another 9.9 million shares. Should that option be tapped, the sacrifice could go for about $1.5 billion.

-Reuters contributed to this report.

Disclosure: Cramer’s charitable trust owns percentages of PepsiCo.

Update: This story was updated to clarify that Albertsons’ IPO is slated for this week.

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