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On Tuesday, BofA Securities adjusted their outlook on Sprouts Farmers Market (NASDAQ:SFM), increasing the price target to $185 from the previous $165 while maintaining a Buy rating on the stock. The adjustment reflects a positive stance on the company’s financial prospects. Currently trading at $168.90, InvestingPro analysis suggests the stock is trading above its Fair Value, with the stock price near its 52-week high of $170.50.
The BofA Securities analyst cited several reasons for the raised price target, including a robust same-store sales forecast and the potential for further positive revisions to estimates. The analyst’s optimism stems from Sprouts Farmers Market’s continued same-store sales strength and a sustained higher gross margin rate of 38%. The company has demonstrated impressive momentum, with revenue growth of 10.52% and a remarkable 230% return over the past year.
The new price target of $185 is based on a 40 times multiple of the estimated earnings per share (EPS) for the year 2026, which has been revised upwards by 10 cents. Previously, the target was based on a 37 times multiple of the estimated EPS. The analyst believes that the company’s performance justifies a higher valuation multiple.
Sprouts Farmers Market’s strong comp sales and traffic, coupled with solid margin performance, are key factors contributing to the analyst’s confidence in the company’s ability to sustain growth. The analyst’s commentary underscores the expectation of continued financial health for the grocery chain.
Investors considering Sprouts Farmers Market shares now have a revised benchmark to consider, as the company’s stock price target reflects an expectation of ongoing success and profitability in the coming years. For deeper insights into SFM’s valuation and growth prospects, InvestingPro subscribers can access 17 additional ProTips and a comprehensive Pro Research Report, part of the platform’s coverage of over 1,400 US stocks.
In other recent news, CFRA analyst Arun Sundaram has raised the price target for Sprouts Farmers Market to $177, up from the previous $136, while maintaining a Hold rating on the stock. This adjustment comes in the wake of Sprouts Farmers Market’s robust performance with shares soaring over 200% in the past year. The company reported an 8.4% year-over-year increase in comparable sales in the third quarter of 2024, a significant leap from the 3.4% growth in 2023 and 2.2% in 2022.
Moreover, Sprouts Farmers Market’s operating margins are projected to rise to 6.5% in 2024, from 5.8% in 2023 and 5.6% in 2022. This improvement suggests that the company’s margins will exceed those of Walmart (NYSE:WMT) and Costco (NASDAQ:COST), which have margins under 5% and 4% respectively.
In addition, Sprouts Farmers Market is set to aggressively expand its store count, aiming for a 10% annual growth in units. This translates to approximately 45-50 new stores each year, with the ultimate goal of exceeding 1,000 stores.
The revised 12-month price target of $177 is based on 35 times CFRA’s newly initiated 2026 earnings per share (EPS) estimate of $5.07. The firm’s EPS projections for 2025 have been adjusted to $4.35 from $4.52, while the 2024 estimate remains unchanged at $3.69. Sundaram expects Sprouts Farmers Market’s EPS to grow by approximately 15%-20% annually over the next two years, surpassing the consensus estimates of 10%-15%.
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