Sprouts Farmers Market Inc (NASDAQ:SFM) shares target price have been revised upwards by $5 to $24 by S&P Capital IQ analyst Agnese. This meant that the stock still offers about ten percent upside potentials though the stock is trading down about two percent on Monday. However, the brokerage has retained its Hold rating on the stock due to limited upside rewards.
The price objective on Sprouts Farmers Market is based on an EV/EBITDA of 13X, above the company’s peer average. Agnese believes that the company needs a premium valuation on possible gains from consolidation in the industry. He pointed out the unconfirmed Bloomberg report that indicated the company has engaged itself with another supermarket chain, Albertsons Co for being acquired.
In a research note to clients, the brokerage commented, “We believe a potential deal makes strategic sense as increased scale would help SFM lower costs and price more aggressively in a low inflationary environment and with competition from traditional competitors expected to remain intense over the next few years.”
Following the reports of Sprouts Farmers Market being engaged in discussions to be acquired, the stock gained to hit $23.07 immediately on Monday opening. However, the stock has not only shed the gains but lost further to trade lower. In the last 52-week period, the stock hit $30.00 while the lowest price is $17.38 during the period.
At time of writing this, the stock fell 2.07 percent.