Whole Foods: A natural breakout?

The organic grocer is fundamentally strong and the stock is technically poised for an upside move.

By TheStockAdvisors Aug 22, 2012 12:18PM
© Fuse/Getty ImagesBy Leo Fasciocco, Ticker Tape Digest

With 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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Tags: WFM
12Comments
Aug 22, 2012 1:45PM
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It's amazing what people will pay when they know and understand someone isn't feeding them crap.
Aug 22, 2012 4:02PM
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Too expensive for me for to shop there. Finding healthy food isn't the issue, having the money to shop there is. Eating fruits, vegetables and grains doesn't cost that much and I don't have to go there to find healthy food.

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I don't know about you, but I can rarely afford a $9 loaf of bread.
Aug 22, 2012 4:37PM
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I shop wholeFoods and will pay the extra for organic foods, theres a difference between Walmart fruit full of pesticieds, and whole foods non GMO and pesticide free. I will pay the extra not to be poisoned
Aug 22, 2012 5:29PM
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Very good food, but, way too expensive, I can get the same or almost identical organic food at Trader Joe's or sprout's right down the street for much less.  I would not buy their stock, simply as a consumer I can see same stuff for a lot less money at competitor.  You can only run to the well so many times.
Aug 22, 2012 7:07PM
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We call it "WHOLE PAYCHECK"  and our local farmers market has oodles of fresh organic produce.
Aug 22, 2012 6:58PM
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whole paycheck market is really cool, but a publix greenwise market, if your in florida and near one, is as good and cheaper. anyone who thinks organic is a scam is a total dooshnozzle. it's worth every penny, esp friuts and vegetables ...
Aug 24, 2012 8:48AM
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WF has pesticide free, herbicide free and non GMO food.  They carry non hormone, non steroid, non BHT milk and dairy., etc etc.  Cleaner shampoo products, whole grain bakery.  Certain folks want that, so there will always be customers for them.  And in my city of 3.3 million people there is no one that matches their selection and quality.  Not Trader Joes, not the dozens of local coops, none of them.  I've shopped at all these places.  Personally, I didn't think people would pay the higher prices at WF, but I was wrong.  They do.  And most of these folks are middle/upper middle class people, not ultra wealthy.  You don't have to buy everything "organic", but the things I want organic are always in one store so I don't have to run all over town.  Gas is expensive too.  I've owned the stock a few years.   Started buying it when I saw their prices didn't scare away their customers.   I may pick up more shares today.
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