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Sprouts Farmers Market’s 2Q17 Earnings Beat: Top, Bottom Lines Up

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Part 4
Sprouts Farmers Market’s 2Q17 Earnings Beat: Top, Bottom Lines Up PART 4 OF 4

J.P. Morgan Upgrades Sprouts Farmers Market to ‘Overweight’

Wall Street on Sprouts Farmers Market

Sprouts Farmers Market (SFM) is covered by 21 Wall Street analysts, who rate the company a 2.3 on a scale of 1 (strong buy) to 5 (strong sell). It has a better rating than its other supermarket peers. Whole Foods Market (WFM), Kroger (KR), and SuperValu (SVU) are rated 3.0, 2.4, and 2.6, respectively.

J.P. Morgan Upgrades Sprouts Farmers Market to &#8216;Overweight&#8217;

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Analyst action after SFM’s 2Q17 results

Sprouts Farmers Market (SFM) was upgraded to “overweight” from a “neutral” rating by J.P. Morgan on August 4. Analyst Ken Goldman wrote in a client note, “We continue to think that overall, grocers are going to face challenging times ahead, mainly because competition continues to intensify. But we think SFM is in a good position – as a premium grocer with a unique business model – to defend itself to a degree.”

Goldman also noted that Sprouts Farmers Market is the only “likely takeout candidate’ remaining among the large grocers. The analyst raised Sprouts’ price target from $24 to $27.

On the same day, Deutsche Bank also raised its price target from $22 to $24.

According to the latest data compiled by Thomson Reuters, Sprouts Farmers Market’ current average target price by 21 Wall Street analysts is $25.81, reflecting an upside of 8%.

Discussing recommendations

Sprouts Farmers Market (SFM) stock has a higher percentage of “buy” recommendations than other major supermarkets—52% of the analysts recommend buying SFM. In comparison, 36%, 33%, and 13% of analysts have a “buy” recommendations for Kroger, SuperValu, and Whole Foods, respectively.

SFM is recommended as a “hold” by 48% of the analysts, while none of them recommend selling the stock. In comparison, Kroger and Whole Foods are recommended as a “sell” by 8% and 4% of the analysts, respectively, while SuperValu has no “sell” recommendations.

Loop Capital, Jefferies, Gordon Haskett, and Morgan Stanley are among the brokers who recommend holding SFM, while Oppenheimer, Barclays, and J.P. Morgan have suggested buying it.

Investors looking to invest in SFM through ETFs can choose to invest in the SPDR S&P Retail ETF (XRT). SFM comprises ~1.1% in XRT.

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