Analysts Raise Sprouts’ Price Target after 3Q17 Results


Nov. 6 2017, Updated 5:10 p.m. ET

Stock market reaction

Sprouts Farmers Market’s (SFM) strong 3Q17 earnings and guidance revision was well received by the market. The company’s stock price rose 9% after the results release on November 2. The organic food retailer’s YTD (year-to-date) losses have now been converted into gains. The company is sitting on a YTD gain of 7.7%.

In comparison, Kroger (KR) and Supervalu (SVU) are down 38% and 47% so far this year, which illustrates the ongoing pessimism surrounding the retail food space. The grocery sector, which already operates in a highly competitive environment, is facing new pressure as Amazon (AMZN) enters the space with the acquisition of Whole Foods Market.

However, big box retailers Walmart (WMT) and Costco (COST) have done better this year. The two companies have risen 30% and 8% to date, respectively.

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Recent analyst actions on SFM

There were no recommendation changes on Sprouts after its 3Q results. However, several analysts raised their price target on the company. Oppenheimer raised the target price from $24 to $25, Susquehanna raised the target from $23 to $24, RBC raised the target from $28 to $29, Jefferies raised the target from $19 to $20, BMO raised the target from $20 to $22, and J.P. Morgan raised the target price from $22 to $24.

Wall Street’s take on SFM

The 23 analysts covering Sprouts have collectively rated the company a 2.3 on a scale where one is a strong buy and five is a sell. It has a better rating than Kroger and Supervalu, which are rated 2.6 and 2.7, respectively. According to the latest data compiled by Thomson Reuters, Sprouts’ current average price target is $24.67, reflecting an upside of 21%. Kroger and SVU have upsides of 7% and 72%, respectively.

The company is rated a “buy” by 52% of analysts and a “hold” by 48% of analysts. There are no “sell” recommendations on the stock.

Investors looking to invest in SFM through ETFs can choose to invest in the PowerShares Dynamic Food & Beverage Portfolio (PBJ). SFM has a weight of approximately 2.3% in PBJ.


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