Whole Foods Downgraded to Hold

Whole Foods Market Inc. (WFMI - Snapshot Report) owns and operates the country's largest chain of natural food supermarkets. While we think the company should be able to deliver solid growth over the long term, we have become more concerned with the company's results in the short-to-intermediate term.

Consumer spending trends are worsening; job losses are mounting; and consumers are looking for ways to spend fewer dollars. Those trends along with the lingering problems in the credit markets are going to negatively impact Whole Foods results more than we were previously forecasting.

In other words, we think things get worse before they get better for Whole Foods. As a result, we are lowering our estimates for 2009 and 2010 and downgrading the stock from Buy to Hold. Still, the company's earnings growth potential is higher than its supermarket peers, and that warrants a higher P/E multiple. Our six-month target price is $11, or 18x our fiscal year 2009 EPS estimate.

Read the full analyst report on WFMI