5 Reasons To Buy Whole Foods Market, Inc. Stock
Lawrence Meyers: WFM stock is a long-term winner and should be grabbed before it recovers.
Whole Foods Market (NYSE:WFM) is the worst performing stock in the S&P 500 this year. I believe the selloff is overdone, and this may be a generational opportunity to get a growing brand at a discount. There may be some more downside, but I would start to buy in at the present price and look to add.
There are several reasons why I think Whole Foods stock has a lot of upside from here. All the negative news regarding same store sales and revenue misses are likely short-term blips in a long-term story that is incredibly compelling.
1. It Remains the Dominant Brand
I find many parallels between Whole Foods and another legendary American success story: Starbucks (NASDAQ:SBUX). They are both dominant brands in an industry with only a few large players.
Starbucks has always faced competition from other players like Peet’s Coffee, Coffee Bean & Tea Leaf, Caribou Coffee, and other regional chains. Sure, the other brands have some nice market share, but Starbucks has always been the dominant brand.
The brand has powerful associations, and the same applies to Whole Foods. When consumers think of the coffee industry, they generally think of Starbucks. Comparably, Whole Foods is associated with organic food.
2. Larger Footprint
Whole Foods has a more expansive presence than competitors Sprouts Farmer’s Market (NYSE:SFM)and The FreshMarket (NYSE:TFM). Fresh Market has 156 stores in 26 states. Sprouts has 170 stores in 9 states. Whole Foods has 360 stores in the US, Canada, and the UK.
More importantly, Whole Foods has far more capital to expand than its peers. Whole Foods sits on $1.2 billion in cash and has almost no debt. Farmers Market is a tiny payer, with only $11 million in cash and $51 million in debt. Sprouts has $149 million in cash and must service its $423 million in debt.
Whole Foods’ balance sheet, along with its robust cash flow, allow it to win any kind of race to expand.