United Natural Foods (UNFI) PT Lowered to $25 at Pivotal Research Following Announced Supervalu Acquisition
Pivotal Research lowered its price target on United Natural Foods (NASDAQ: UNFI) to $25.00 (from $33.00) while maintaining a Sell rating following the company's announced acquisition of Supervalu. The subsequent sell-off for UNFI is not an over-reaction, in analyst Ajay Jain's view. Based on the latest results, earnings at both companies are already under incremental pressure heading into the merger.
The strategic considerations for UNFI are understandable in relation to Supervalu. UNFI needs to take meaningful steps to diversify its exposure to Whole Foods. Regardless of whether it continues to supply Whole Foods under the current agreement or if Amazon takes meaningful steps to self-distribute or diversify its supply needs longer term, the risks for UNFI remain considerable.