Why Whole Foods Might Be a Stale Selection

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Whole Foods Market (NASDAQ: WFM  ) slipped a bit this morning after Goldman Sachs downgraded the natural foods retailer from "buy" to "neutral."

So what: Along with the downgrade, analyst Stephen Grambling planted a price target on Whole Foods of $57 (from $66), pretty much exactly where the stock sits now. While contrarian traders might be attracted to yesterday's big pullback -- triggered by weak sales guidance -- Grambling believes the upside remains limited given the stock's still-lofty valuation and softening top line.

Now what: Goldman lowered its 2014 EPS estimate for Whole Foods from $1.79 to $1.71 and from $2.19 to $2.03. "While we still view WFM as a secular winner with continued opportunity for store growth and margin expansion, we are lowering our comp estimate to reflect the softer top-line trajectory relative to broader industry trends," Goldman noted. "Furthermore, with shares still trading at 34X our downwardly revised but above guidance NTM EPS estimate, we believe a Neutral rating is warranted and would look for a better entry point, all else being equal." But while Whole Foods is certainly no bargain, the recent pullback might be giving Fools a chance to purchase some quality growth at a reasonable price. 

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  • Report this Comment On November 09, 2013, at 11:49 AM, Dunc9602 wrote:

    I know everyone has their own opinion but do you know this is a Stock Advisor pick. I find it interesting when Fool writers have differing opinions on stock. I don't know who to listen to!

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Related Tickers

9/28/2016 4:00 PM
WFM $28.42 Down -0.04 -0.14%
Whole Foods Market CAPS Rating: ****