Thoughts about Wfmi
Wfmi
So far today, the stock has hit a low of 21.57 and a high of 23.22. WFMI is now trading at 23.01, up 1.55 (7.13%). The stock hit its 52 week high of 53.65 in October and set its 52 week low of 20.18 in July. Whole Foods Market reports its third-quarter earnings today after the market closes. Analysts expect a profit of 31 cents per share on revenue of $1.9 billion. Technical indicators for the stock are neutral and improving while S&P gives WFMI a positive 4 STARS (out of 5) buy rating. If you’re looking for a hedged play on this stock, consider an August bull-put credit spread below the $19 range. WFMI stock could fall up to 17.4% before expiration and this position would still be profitable. 1
The editor of StreetAuthority Market Advisor, plains, “”Whole Foods reported same-store sales growth of 7% in the second quarter. That’s not quite as strong as the 9% reported a year ago, but it still represents solid growth and was above what analysts had expected.” 2
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“The high-end grocer has the Big Mo, but its growth strategy may prove perishable.” This article takes a skeptical look at Whole Foods Market Inc (WFMI). While the company “has cultivated its mystique with shoppers — and investors — by being anything but a regular supermarket chain” it is said that in certain cases, ” Whole Foods’ image is better than reality.” An analyst notes WFMI is “hitting on all cylinders ” but predicts ” that it will underperform the broad market.” The article ends by offering that WFMI “is more profitable than peers” but that it could come under pressure if supermarkets would offer some of the same products. 3
WFMI hasn’t been below $20 at all in the past year and has shown support around $21 recently. This trade could be risky if the company’s earnings (due out on 8/5) disappoint, but even if that happens, this position could be protected by the support the stock might find at its year low between $20 and $21. 4
Whole Foods will not be able to maintain its high prices and comfortable margins. The company faces increasing competition from Wal-Mart and traditional retailers who are retooling their stores to offer organic food, and this will put pressure on prices. 5
Options players are extremely optimistic, as they try to call a bottom for the shares. The put/call open interest ratio for WFMI stands at 0.81 and is lower than 92% of all those taken during the past 52 weeks. In other words, investors have been more optimistically aligned only 8% of the time during the past 52 weeks. From a contrarian perspective, this optimism against the stock’s technical weakness has bearish implications. 6
Whole Foods Market Inc.(NASDAQ: WFMI) is the world?s leading retailer of natural and organic foods. Sales of Natural and organic foods are growing at 20% annually, (approximately three times that of the traditional U.S. grocery business). WFMI has ridden the health & wellness trend, thanks to consumers’ perception that organic foods are healthier than their non-organic counterparts. As a result, Whole Foods can charge a substantial premium for the products it carries. 7
To date, the organic movement has been confined to wealthier and more educated demographics. WFMI has been the segment?s pioneer and has made good use of the lead time by opening stores in affluent neighborhoods. However, as these areas reach saturation, Whole Foods is beginning to expand to less wealthy neighborhood. The strategy presents both risks as well as opportunities for growth, as Whole Foods expansion to less-wealthy neighborhoods is bringing it face to face with retail behemoth Wal-Mart Stores, which is expanding its organic food section in light of organic food’s growth and healthy margins. Wal-Mart has a history of undercutting its competitors on price, and as Wal-Mart and other traditional grocery stores such as Safeway (SWY) enter the organic foods market it may be difficult for Whole Foods to maintain its attractive margins and premium prices. 8
Whole Foods is currently doing business with more than 2,400 independent farms. Since the growing season varies from region to region, WFMI cannot buy all of their products locally, but the company only buys products that meet their high quality standards. 9
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Tags: better than reality, big mo, broad market, grocer, growth strategy, inc, investors, market, mystique, peers, quarter earnings, second quarter, shoppers, stock, store sales growth, supermarket chain, supermarkets, technical indicators, wfmi, whole foods, whole foods market, whole foods market inc
Tags: better than reality, big mo, broad market, grocer, growth strategy, inc, investors, market, mystique, peers, quarter earnings, second quarter, shoppers, stock, store sales growth, supermarket chain, supermarkets, technical indicators, wfmi, whole foods, whole foods market, whole foods market inc