Buy Sprouts Farmers Market Shares On Weakness, SunTrust Says

Sprouts Farmers Market Inc SFM lowered its H2 guidance, driven by persisting, and potentially worsening, deflationary pressures in Q3.

David Magee of SunTrust Robinson Humphrey maintained a Buy rating on the company.

Deflationary Pressures

Magee mentioned that management had discussed these pressures, as well as the accompanying sector promotions, during the Q2 call in early August.

“Still, while the magnitude (and the suddenness) of the cuts surprised us, we think SFM doesn’t intend to revise again this year,” the analyst stated.

Magee believes that the deflationary period, which already appears “extended” when compared to the historical standards, could potentially reverse in H1:17.

Buy on Weakness

The analyst also believes that “traffic continues to run positive, indicative of share gains,” while adding, “We would buy on weakness.”

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