Increasing competition in the grocery space spells big trouble for Wal-Mart, trader David Seaburg argues.
"Wal-Mart is under siege here," Seaburg, head of equity sales trading at Cowen and Co., said Friday on CNBC's "Trading Nation. " "Their biggest revenue driver — the grocery segment — is under attack by Amazon and the acquisition of Whole Foods. "
On Thursday, Amazon announced that it will complete its acquisition of Whole Foods on Monday and will immediately cut prices on a range of items in the high-end grocery stores. Shares of Wal-Mart fell by as much as 3 percent in reaction.
"With these cost cuts, Whole Foods is going to be able to go after Wal-Mart's market share, because they're going to attack and go after the customer and take them from Wal-Mart," Seaburg said. "They're going to be able to compete on price and provide a much higher-quality product, and Wal-Mart's going to suffer."
In addition, Seaburg points to the competition posed by Aldi, a German discount supermarket chain that has embarked on an aggressive U.S. expansion.
Aldi is "a discount provider that offers a high-quality product. I think Wal-Mart is going to be under siege from them as well."
While Wal-Mart has been seen as a "relative safety trade," the competitive pressure will soon "come to a head," Seaburg predicted. "I think the stock's expensive here and I don't see much upside."
Not everyone is concerned about the Amazon impact, however.
"I don't think it's a big concern," MKM Partners research analyst Patrick McKeever told CNBC in a phone interview Friday. "Wal-Mart's grocery business is pretty well-differentiated."
"Lower prices will probably attract some new customers into Whole Foods, but I don't think they go low enough for that core Wal-Mart customer," McKeever said.
In addition, Whole Food stores tend to be "in more affluent areas." And while Whole Food's prices may come down, Wal-Mart has done "a pretty good job of improving its overall grocery business – particularly fresh foods."
All in all, the Whole Foods concerns merely represent "a little noise here," said the analyst, who has a neutral rating on Wal-Mart.
Even after a tough end to the week, Wal-Mart shares remain nearly 14 percent higher year to date.