Cantor Fitzgerald Reiterates On Whole Foods Market Ahead Of Earnings

Cantor Fitzgerald's food and drug retail/wholesale analyst Ajay Jain reiterated a Sell rating and $32 price target on Whole Foods Market, Inc. WFM ahead of the company's fourth quarter results on November 5.

"We think the biggest impact on near-term stock performance will be how management guides for fiscal 2015," Jain wrote in a note to clients on Wednesday. "Even if Whole Foods guided conservatively and is capable of generating an expense driven earnings beat in the fourth quarter, we remain concerned about how the continued sales deceleration of the existing store fleet will impact the outlook for fiscal 2015."

Jain notes that there are few indications available to demonstrate that the sales trajectory has stabilized at Whole Foods. The analyst adds that fiscal 2015 guidance will be measured against management's previous long-term guidance issued on May 6 calling for 14 percent to 16 percent annual earnings per share growth through fiscal 2018. In addition, the company expects annual operating margin expansion and comps of more than 6 percent over the next four years.

Jain believes that the acceleration of comps to reach management's targets would require "heavy margin investment."

Jain concludes that it is too early to “call an inflection point for Whole Foods” and the stock is a “lagging indicator to fundamentals.”