This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Whole Foods' Stock Plunge Presents Buying Opportunity

NEW YORK ( TheStreet) - Whole Foods Market (WFM - Get Report) investors, don't panic.

Just because the company reported softer-than-expected quarterly sales comps, doesn't mean the business is going to the dogs.

Whole Foods shares plunged as much as 11% on Thursday following lower-than-expected sales comps for the quarter of 5.9% and a slightly cautious outlook for next year from the specialty and organic foods grocer. But some analysts see the decline as a buying opportunity.

"As we see nothing structurally broken, we recommend buying, especially on any weakness in reaction to the comp shortfall," Jefferies analyst Mark Wiltamuth wrote in a note released on Thursday. He rates the company "buy."

"Remember Feb 2013 when the market was convinced natural/organic was having a slowdown? These fears proved short lived and WFM staged a strong recovery as reassuring sales results soon followed. We see no change to the 7%-10% organic/natural product industry demand trend," Wiltamuth wrote.

Bank of America Merrill Lynch analyst Robert Ohmes raised his price target to $68 a share in a research note on Thursday. He also views the weakness in the shares as "an attractive buying opportunity." Ohmes has a "buy" rating on the stock.

"We remain confident in WFM's long-term outlook despite rising competition within the natural/organic food retailing space," he wrote.

He likens it to the competitive benefits of Whole Foods' "difficult-to-replicate, decentralized operating structure" as well as the growing importance of a "well-executed natural/organic perishables and prepared foods offering, where we believe WFM will remain the leader," the BofA Merrill Lynch note says.

Whole Foods is also expanding into "a more accessibly priced assortment as it narrows pricing gaps vs. competitors (through broad-based and regional strategic price investments and promotions) while maintaining a team of well-trained, passionate and health-conscious associates with a continued focus on local communities and industry-leading product quality," the note said.

Following market close on Wednesday, Whole Foods reported fourth-quarter and full-year earnings of $121 million, or 32 cents a share and $551 million, or $1.47 a share, respectively.

While quarterly earnings marginally beat consensus estimates, investors immediately honed in on the specialty food grocer's comparable store sales growth of 5.9% for the quarter and identical stores sales, which excludes five relocated stores and two store expansions, of 5.5%. Both growth rates were the lowest of its fiscal 2013 year. Investors were also concerned with the company's tapered sales growth outlook for its fiscal year 2014.

The Austin, Texas-based company now expects sales growth between 11% and 13%, down from 12% to 14% previously. Whole Foods also expects comparable store sales growth between 5.5% and 7% compared to 6.5% and 8% previously. While the company still plans to open between 33 and 38 new stores in 2014, the lower sales outlook translates into full-year EPS of $1.65 to $1.69 a share from $1.69 to $1.72 a share. Consensus estimates were calling for earnings of $1.70 a share.

Whole Foods shares were falling 9.1% to $58.63 at last check. The stock was up 43% as of Wednesday's closing price.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
WFM $40.94 0.00%
AAPL $123.38 0.00%
FB $95.29 0.00%
GOOG $628.00 0.00%
TSLA $264.82 0.00%

Markets

Chart of I:DJI
DOW 17,630.27 +189.68 1.09%
S&P 500 2,093.25 +25.61 1.24%
NASDAQ 5,089.2060 +49.43 0.98%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs