What happened

United Natural Foods (NYSE:UNFI) shareholders had a good day yesterday. The natural, organic, and specialty foods distributor (and now, owner of grocery chain Supervalu) announced it expects adjusted earnings per share between $1.69 and $1.89 in 2019, helping to send the stock up 28%.

Today, it's paying for it. As of 1:35 p.m. EST on Thursday, United Natural stock was down a whopping 17.1% -- losing more than half Wednesday's gains -- in response to a report by RBC Capital Markets that pans the stock's prospects in light of its Supervalu ownership.

Supermarket produce department

For better or worse, United Natural Foods is now a direct participant in the grocery wars. Image source: Getty Images.

So what

RBC's report, which takes the form of a price target reduction, notes that United Natural Foods could enjoy favorable macro trends from lower freight, gas, and inflation costs in the coming year. At the same time, however, RBC worries that United Natural may suffer from the fact that it's now a competitor to Amazon.com's Whole Foods chain -- and Amazon therefore has the "ability, incentive, and precedent history to de-emphasize" United Natural Foods' business, as noted by TheFly.com.

Additionally, RBC says it's optimistic to expect that United Natural will enjoy much in the way of "out-year synergies" as it struggles to integrate the Supervalu supermarket chain into its business model.

Now what

Whether Amazon ultimately decides to use its market power to hurt United Natural Foods' distribution business remains to be seen. As for Supervalu, though, the danger there is much clearer. In contrast to United Natural per se, which is profitable and historically usually free-cash-flow positive, Supervalu was at last report both unprofitable (losses of $19 million over the last 12 reported months) and burning cash (with negative free cash flow of $212 million).

Maybe putting Supervalu under new management will cure these ills. Maybe not. But it's the "not" scenario that's worrying RBC today -- and the reason investors are selling United Natural Foods stock.

Check out the latest United Natural Foods earnings call transcript.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.