Albertsons (ACI, Financials) just got a vote of confidence from BMO Capital. The firm upgraded the grocery chain to Outperform and bumped its price target to $25 a share, saying it expects investors to start seeking out steady, lower-risk stocks in the second half of the year.

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BMO's pitch is simple: Albertsons looks cheap next to its peers, and the setup going into the back half of 2025 seems favorable. Margins are almost back to pre-pandemic levels, earnings expectations are already low, and the threat of aggressive price-cutting across the industry isn't as strong as usual. Tariff-related cost pressures are forcing bigger retailers to hold back.

The company's management has been clear that 2025 is an investment year and BMO thinks the market has already priced that in. On top of that, Albertsons has made progress cleaning up its balance sheet, cutting its unfunded pension liability to $3.6 billion from $4.9 billion in just a year.

Still, it's not all roses. The analysts say Albertsons is trailing Kroger (KR, Financials) when it comes to digital operations and process centralization areas that matter in a cost-sensitive business. But even with those gaps, BMO sees room for the stock to move higher. At 12x projected fiscal 2027 EPS of $2.07, the $25 price target reflects what they see as a fairer valuation for a company that's still flying under the radar.

This article first appeared on GuruFocus.

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