Market Overview

Sprouts Vs. Walmart: Which Is Best In A Whole Foods-Amazon World?

Share:
Sprouts Vs. Walmart: Which Is Best In A Whole Foods-Amazon World?

While Wells Fargo senior analyst Zachary Fadem sees Amazon.com, Inc. (NASDAQ: AMZN)'s potential acquisition of Whole Foods Market, Inc. (NASDAQ: WFM) comprising 3 percent of the grocery industry, he has listed Sprouts Farmers Market Inc (NASDAQ: SFM) as a top pick and reiterated his Outperform rating.

“Sprouts Farmers Market is our top pick in grocery owing to its high growth characteristics, N&O/value positioning and valuation floor from industry consolidation. We remain more cautious on Wal-Mart Stores Inc (NYSE: WMT) and Costco Wholesale Corporation (NASDAQ: COST), owing primarily to relative valuation, and would await more attractive entry points,” he said.

Is Sprouts A Potential Acquisition Target?

Fadem sees the grocery industry consolidating in the future, and with Sprouts' strong fundamentals, this raises its valuation despite the industry’s current competitive landscape (check out Fadem's track record).

Sprouts is currently “well-positioned with differentiated with differentiated and expanding product offerings, focus on fresh/value (attractive higher growth sub-segments) and growth opportunities from private label, prepared foods and digital initiatives,” he noted.

Walmart Cannot Keep Up

Walmart and Amazon have been competing for several years, but Fadem still sees Amazon staying a couple moves ahead.

He pointed out Whole Foods will now be able to offer “Prime discounts for those with SNAP benefits compete directly with Walmart’s lower income core (Walmart’s traffic has been 85%+ correlated with low income consumer confidence; we estimate SNAP=4.5% of WMT US sales).” Additionally, Walmart is currently trading at a very steep valuation, which pushed Fadem to issue a Market Perform rating on Walmart.

Related Links:

Amazon's Acquisition Of Whole Foods Should Create Lower Prices, Offer Better Consumer Experience

Sprouts Farmers Market Downgraded, But Fundamentals Remain Strong As Ever
______
Image Credit: By Littletung (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

Latest Ratings for SFM

DateFirmActionFromTo
Feb 2020CFRAMaintainsBuy
Feb 2020Deutsche BankMaintainsBuy
Feb 2020BernsteinUpgradesMarket PerformOutperform

View More Analyst Ratings for SFM
View the Latest Analyst Ratings

Posted-In: Wells FargoAnalyst Color Long Ideas M&A Reiteration Analyst Ratings Trading Ideas Best of Benzinga

 

Related Articles (AMZN + COST)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
SNPSCFRAMaintains160.0
GRPNMorgan StanleyMaintains1.5
PPCCFRADowngrades30.0
HMSYCantor FitzgeraldReiterates33.0
FSLRCascendMaintains60.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com