Whole Foods: A natural breakout?
The organic grocer is fundamentally strong and the stock is technically poised for an upside move.
By Leo Fasciocco, Ticker Tape DigestWith annual revenues of $11.1 billion, Whole Foods Market (WFM) owns and operates the country's largest chain of natural food supermarkets.
It is like a neighborhood grocery store, an organic farmer's market, a European bakery, a New York deli, and a modern supermarket all rolled into one.
WFM is poised to show strong earnings for the upcoming third quarter and we see the stock in a good spot to be accumulated.
Since setting a bear market low at $7.04, the stock has made a sensational recovery and is in a strong uptrend.
It peaked near $97 in June. The stock then put down a flat base that featured one shakeout to the downside. The stock bounced back quickly from the selling spree. It is poised to breakout to a new high. If it can do that it could draw in more buying.
Technically, the stock's momentum indicator is solidly bullish. In addition, its accumulation-distributions line is trending higher and has not shown much selling pressure.
This fiscal year ending in September, analysts are forecasting a 30% jump in WFM's earnings to $2.52 a share from $1.93 a year ago. Analysts have boosted their estimates.
The stock sells with a price-to-earnings ratio of 38. That is high given the earnings growth rate. So one needs to be watchful.
For fiscal 2013, ending in September, Wall Street projects a 15% rise in net to $2.90 a share from $2.52 anticipated for this year.
We suggest accumulation of a partial stake now with further buying to be done on a breakout over $97.60. We are then targeting WFM for a move to $115 off a breakout. A protective stop can be placed near $91.
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