SunTrust maintains its Buy rating on Whole Foods Market, Inc. , despite saying traffic is still a "bigger challenge" for the organic foods retailer.
Whole Foods reported $0.37 per share in its third-quarter earnings, in line with the consensus/Street estimates. Same-store sales in the period fell 2.6 percent, a bit more than SunTrust's -2 percent number and the Street's -2.3 percent.
But, analyst David Magee is bullish on the company, and here's why:
"We're pleased to hear the positive early read on the 365 concept (which may play a bigger role in '17 expansion), the re-pricing of produce and home delivery; the pilot loyalty program's results point to a broad rollout. So, we advise investors to be patient, noting WFM's historically low multiple," Magee wrote in a note.
However, Magee acknowledged, "Despite all the work on price repositioning in the past two years, consistent sales growth continues to be elusive."
On traffic challenges, the management could only point to "competition" as the cause agent. Magee noted that it is "hardly new," and hasn't changed quarter-over-quarter materially.
For 2016, the analyst kept his EPS estimate unchanged at $1.50, but cut revenue forecast to $15.739 billion from $15.839 billion.
That said, Magee remains positive on the sector's growth, and the store's continued strong position and opportunity to lower costs.
"Lastly, recent evidence to the contrary, we continue to think sales will gradually improve through a combination of factors including sector growth, less incremental investment by some competitors, easier comparisons, and greater connection with consumers thanks to the current initiatives," Magee added.
Magee has a price target of $38 on the stock/