Shares of Grainger (GWW) are rising in early trading despite Deutsche Bank analyst John Inch downgrading the stock to Sell and cutting his price target due to the near-term risk of a price war between the company and its peers and the longer-term risk posed to its industry from e-commerce giant Amazon (AMZN).

PRICE COMPETITION: Inch said Grainger is "positioned to quickly lose share" as competitors respond to its recent price actions with price cuts of their own. Inch believes that extra volume the company realized from its price actions reflects an increased willingness by customers to chase price and does not support Grainger's belief that the volumes will "stabilize margin erosion."

SIMILARITY TO STAPLES: Inch added customer loyalty is becoming an increasingly "fleeting" characteristic in the maintenance, repair and operations supplier market, whose "flat to very slow growth dynamics" will increase price-driven competition. Inch did not make comments on specific Grainger competitors, but other MRO providers include HD Supply (HDS), Watsco (WSO), Anixter (AXE) and Fastenal (FAST). Inch said he believes there is a "strong similarity" between the positioning of Grainger and Staples (SPLS), as both companies are operating substantial branch locations that have faced heavy pricing pressure from Amazon. Inch said the experiences of the office supply company may foreshadow Grainger's over the next few years, suggesting the valuation for the company will head "significantly lower" as the threat Amazon poses to the MRO space gets more fully appreciated.

PRICE ACTION: Shares of W W Grainger rose 0.4% to $175.46 in morning trading. Over the last three months, the stock is down about 31%.