UPDATE: Bank of America Initiates Coverage on Sprouts Farmers Market on Significant Premium Valuation
In a report published Tuesday, Bank of America analyst Robert F. Ohmes initiated coverage on Sprouts Farmers Market (NASDAQ: SFM) with an Underperform rating and $37.00 price target.
In the report, Bank of America noted, “We are initiating coverage of Sprouts Farmers Market (SFM) shares with an Underperform rating and $37 price objective. SFM priced its IPO on 7/31/13 at $18 (above the initial range of $14-16) and the stock has appreciated significantly from the IPO price. Our $37 PO reflects a significant premium valuation based on a P/E of 60x our 2015 EPS estimate of $0.62 that we believe is supported by SFM's unique position as a 'value priced' specialty natural/organic grocery retailer with strong potential for long-term sustainable 20-25% EPS growth. Our price objective is also supported by our discounted cash flow analysis (assuming a 7% expected return and 13x terminal value EBITDA multiple).”
Sprouts Farmers Market closed on Monday at $39.03.
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