Whole Foods Market, Inc. (NASDAQ:WFMI) was reinstated as outperform on 11-10-06. This stock is very attractive to me based on the things I've read about it. If the analyst's assertions are true, and WFMI's stock lost value based on a simple change in management focus from business operations to maintaining share price, then what should be happening in timely fashion will be a moderated climb back up to WFMI's fair market value. Salim Haji, an excellent writer over at The Motley Fool, offers the opinion that this stock has an intrinsic value in the $50 to $60 range.
With additional consideration of the fact that WFMI is undertaking a strategic stock buy back program, if I was looking for some fun places to play with some funds, this would be one of them. It is my opinion that this stock deserves some close attention right now. I think it is headed back up. One other thing I take into consideration about this situation is the possibility that Wal-Mart is going to fall flat on its corporate face with its "organic" food roll out. If that happens, (and I think it will), then Whole Foods Market will add even a bit more sparkle to my eye!
You can learn more about organic foods at About Organics.
Closing Bell: Stock bulls and dollar death (DDRX,GMCR, PEET, SBUX, EBAY, CI, TECD)
So long peak oil, here comes peak uranium
Black Friday expected to be strong, no promises for Christmas
Reader Comments (Page 1 of 1)
12-11-2006 @ 2:11PM
r. noonan said...
WFMI is selling at a very high PE ratio, but the kind of growth that it needs to sustain the level just aren't there. Whole Foods sells to the affluent, and does so profitably. If this were a privately held company, it would just be a matter of milking the cash cow. As a public corporation, there is a growth imperative.
There are only so many zip codes that will support premium-priced retail, and after that you have a choice. You either move into the less lucrative locations and accept lower sales volumes, or you change your quality/price mix to accomdate. If you move in one direction, margins erode. Move the other way, and you taint the image. It appears that the current strategy is to do both.
No doubt, Motley Fool has a love affair with this stock. True to form, they will pump it from every angle, rather than admit that the stock had it's time, and now that time is over. And what is this, saying that a stock has an "intrinsic value" of $50 to $60? Please. The stock is worth exactly what the market says it is worth, and no amount of pounding the table and insisting otherwise will change that.
As for Wal-mart's organic shoppers moving to Whole Foods - hell will freeze over first. It's not that I have any faith in that program, nor would I set foot in a Wal-mart or own their stock. But grocery can be broken into three major segments: premium, mainstream, and discount. Premium and mainstream fight for customers at the margin, mainstream and discount fight for customers at the margin, but premium and discount never fight for a sale. Go into a Whole Foods and a Wal-mart and ask several customers if they ever shop at the other store. You will get some very blank stares.