UPDATE: Morgan Stanley Initiates Coverage On Sprouts Farmers Market

In a report released Tuesday, Morgan Stanley analyst Vincent Sinisi initiated coverage on Sprouts Farmers Market SFM with an Overweight rating and a $38 price target.

Sinisi appears bullish on his 2013 to 2016 EPS CAGR estimate of 35 percent for the company. He adds that Sprouts Farmers Market is a direct play on the natural/organic secular growth and the company holds a competitive advantage by offering its products for cheaper than its competitors.

Morgan Stanley projects between 13 to 14 percent store growth with a 95 percent productivity level. Sprouts Farmers Market is positively skewed on Morgan Stanley's risk/reward guidance given by the company's new store productivity growth over 100 percent for the last two quarters.

Morgan Stanley's price target is given by the firm's 2015 EPS estimate of $0.92 ($0.07 above consensus) giving a P/E multiple of 41x.

Shares of Sprouts Farmers Market are up over 3.5 percent.