A Pro's Take On Kroger Stock After Thursday's Plunge

Grocer Kroger Co KR reported second-quarter results Thursday that prompted the stock's largest sell-off in six months.

The company said it earned 41 cents per share in Q2 on revenue of $27.869 billion versus expectations of 37 cents per share and $27.97 billion. In addition, same-store sales excluding fuel rose 1.6 percent — shy of the 1.8 percent the Street was expecting.

What Happened

Kroger's stock has seen continued momentum since the spring when it made a "nice higher low" and went on to achieve a "very nice higher high" in the summer, Miller Tabak equity strategist Matt Maley said during a recent CNBC "Trading Nation" segment. Just weeks before Thursday's earnings print, the stock traded above its old resistance level of $28.50 and traded above its trendline going back to the 2016 highs.

Thursday's sell-off erased most of the momentum, and a brief rally Friday morning was short-lived and the stock couldn't find significant support above the $28 trendline level.

Why It's Important

Kroger's status as one of the "most dominant players" within the grocery business remains unchanged, Mark Tepper, CEO and president of Strategic Wealth Partners, also said during the "Trading Nation" segment. The sector is too competitive, with online giants like Amazon.com, Inc. AMZN that are "absolutely killing them," he said. 

What's Next

Kroger's outlook is essentially a "coin flip" at current levels, as a notable move below $28 would represent a break of the trendline and would be "quite negative for the stock," Maley said. Similarly, if the stock is able to hold the line and show a higher low, it would be seen as "quite positive," he said. 

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