UBS: The good news for Whole Foods this week is probably already 'priced in' (WFM)
Lasser's note follows a 13D SEC filing that revealed that activist investment firm JANA Partners had taken an 8.3% stake in Whole Foods. The filing revealed that the firm wants to speed up the turnaround process at Whole Foods.
After taking JANA's involvement into consideration, UBS is still skeptical about further gains in the stock, saying that the best possible outcome is likely "priced in:"
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"While JANA's plans are ambitious, we think WFM's challenges run deep and that it needs to evolve its business model. With the stock trading at 25x its NTM EPS, we think a favorable outcome is already more than priced in. Thus, we think it's best to be cautious."
UBS recounted some of the struggles that have gotten Whole Foods into trouble in the last several years. One of the biggest problems the organic supermarket has faced has been the entrance of less expensive healthy shopping alternatives for consumers at stores such as Kroger and Sprouts Farmers Market.
The note suggested that to regain market share, Whole Foods would need to cut prices by 10-15%, which would have a significant negative impact on the grocer's profit margins.
Whole Foods is up 1.64% today to $34.10.
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