Imperial Capital Cuts Price Target on Whole Foods Market (WFM) to $53 Following 3Q Results
Imperial Capital maintained an Outperform rating on Whole Foods Market (NASDAQ: WFM), and cut the price target to $53.00 (from $65.00), following 3Q15 results. WFM reported 3Q15 EPS of $0.43 vs. $0.41 in 3Q14. 4Q15 EPS is expected to be $0.34-0.35.
Analyst Mitchell Pinheiro commented, "We are maintaining our Outperform rating and lowering our one-year price target to $53 from $65 on shares of WFM. Our price target is about 45% above the recent share price. We continue to view the current valuation as an attractive long-term entry point into this high quality, differentiated premium retailer that continues to lead and gain share in the fastest growth segment in consumer staples – natural and organic. 3Q15 results were below expectations as comp growth decelerated to 2.2% on the heels of negative media attention and increased competition, despite the numerous marketing initiatives and price investments made in FY15. The stock will likely have a tough time moving higher with comps stuck at the low single-digit level and 4Q15 will likely not show a meaningful comp recovery without more proactive marketing, something WFM will not launch until early FY16. Meanwhile, the new 365 store has created more investor confusion and skepticism, which further muddies the story until these stores open. That said, WFM has 114 stores in its pipeline (roughly 30% square footage growth) with attractive economics and returns on capital (>14%) that have been re-evaluated using lower comp growth estimates to ensure the sites remain viable."
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Shares of Whole Foods Market closed at $36.08 yesterday.