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On Thursday, CFRA analyst Arun Sundaram upgraded Sprouts Farmers (NASDAQ:SFM) Market shares to Buy from Hold, simultaneously increasing the price target to $205 from the previous $149. The new target reflects a valuation of 35 times the firm’s 2026 earnings per share (EPS) estimate, which Sundaram raised to $5.85 from $5.51. The 2025 EPS forecast was also increased to $5.16 from $4.82. Currently trading at $174.53, the stock has delivered an impressive 166% return over the past year, with a current P/E ratio of 46.3. According to InvestingPro analysis, the stock appears to be trading above its Fair Value, with 12 additional exclusive insights available to subscribers.
Sundaram justified the premium valuation based on Sprouts Farmers Market’s leading comparable sales growth, robust margin expansion, and significant potential for new store openings. The company has demonstrated strong performance with a 12.9% revenue growth and a healthy 38.4% gross profit margin in the last twelve months. The analyst anticipates that the company will continue to benefit from the persistent health and wellness trend, supported by its unique assortment of specialty and attribute-based products.
The introduction of Sprouts Farmers Market’s new loyalty program, expected in the third quarter of 2025, is predicted to further boost comparable sales towards the end of 2025 and into 2026. Additionally, the shift to self-distribution for meat and seafood is projected to improve margins in 2026. Sundaram noted that given the company’s relatively early development stage compared to other grocery peers, there are more opportunities for structural margin expansion.
The upgrade to a Buy rating reflects Sundaram’s forecasts for Sprouts Farmers Market’s revenue and EPS that exceed the consensus for both 2025 and 2026. The analyst’s optimistic outlook is based on several strategic initiatives that the company is expected to implement in the coming years, which are anticipated to drive growth and profitability.
In other recent news, Sprouts Farmers Market reported strong financial results for the first quarter of 2025. The company achieved earnings per share (EPS) of $1.81, surpassing the expected $1.54, marking a 17.5% positive surprise. Revenue was in line with projections at $2.2 billion, reflecting a 19% increase year-over-year. Despite this performance, Sprouts’ stock experienced a decline of 1.73% in aftermarket trading. The company continues to focus on expanding its product offerings and plans to open at least 35 new stores in 2025. Analysts from firms like Goldman Sachs and Oppenheimer showed interest in the company’s loyalty program, which is expected to drive customer engagement and sales growth. Additionally, Sprouts has begun self-distributing fresh meat and seafood, aiming to enhance product freshness and supply chain efficiency. The company remains optimistic about its growth prospects, anticipating total sales growth of 12-14% for the year.
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