Market Overview

Sprouts Farmers: Buy The Dip, This Could Be The Next Takeout Target

Share:
Sprouts Farmers: Buy The Dip, This Could Be The Next Takeout Target
Related SFM
Zacks Market Edge Highlights: GrubHub, Costco, Sprouts Fresh Market, Blue Apron and Amazon
The Best Food Stocks to Buy Now
Related AMZN
A Tip Of The Cap To Red Hat's Strong Quarter: Sell-Side Roundup
A Message For Uber: You Can't Scale Bad Culture
Three REITs Approaching Value Territory (GuruFocus)

After Sprouts Farmers Market Inc (NASDAQ: SFM) shares dipped following the news of Amazon.com, Inc. (NASDAQ: AMZN)'s acquisition of Whole Foods Market, Inc. (NASDAQ: WFM), Oppenheimer analyst Rupesh Parikh believes the news has created a huge buying opportunity for the supermarket chain.

“We view the SFM sell-off today as an attractive entry point to get involved with a very high-quality retailer. On a fundamental basis, we believe the company remains well positioned on its own and there is also takeout potential down the road. As we have written in the past, we see a takeout value as high as ~$30,” said Parikh (see Parikh's track record).

Thus, Parikh upgraded the stock to Outperform with a $24 price target.

The 2 Different Scenarios

Parikh believes with Whole Foods no longer in the picture, two potential scenarios could play out:

    1. In the base case, the stock is worth $22 without a takeout.
    2. With an acquisition, the stock could be worth approximately $30 dollars.

The largest risk to these estimates is if Whole Foods massively cuts prices in order to gain a competitive advantage.

Sprouts shares were trading down over 5 percent, at $21.16, during Friday’s market session.

Related Links:

Amazon Will Buy Whole Foods For $13.7 Billion

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

Latest Ratings for SFM

DateFirmActionFromTo
Jun 2017OppenheimerUpgradesPerformOutperform
Jun 2017Morgan StanleyDowngradesOverweightEqual-Weight
May 2017Loop CapitalInitiates Coverage OnHold

View More Analyst Ratings for SFM
View the Latest Analyst Ratings

Posted-In: Long Ideas News Upgrades Price Target M&A Analyst Ratings Movers Trading Ideas Best of Benzinga

 

Related Articles (AMZN + SFM)

View Comments and Join the Discussion!