Sell-Off Isn't Over for This Stock, Says Analyst

UNFI recently announced higher costs related to its Supervalu acquisition

by Karee Venema

Published on Mar 7, 2019 at 12:53 PM

Pivotal Research cut its rating on United Natural Foods Inc (NYSE:UNFI) to "sell" from "hold," and slashed its price target to $8 from $14. This follows the Whole Foods supplier's fiscal second-quarter EBITDA loss -- reported Monday -- which CEO Steven Spinner said was due to "higher than anticipated costs" associated with its Supervalu acquisition. Analyst Ajay Jain expects these troubles to continue in the second half of 2019, and lowered his full year EBITDA forecast, as well.

Most brokerage firms are already skeptical of UNFI stock, with 15 of 17 maintaining a "hold" or worse recommendation at last night's close. Plus, the average 12-month price target of $14.36 is a slim 2.5% premium to the equity's current perch at $14.36 -- up 2% so far today.

This pessimism is seen elsewhere on Wall Street, too. Short interest on United Natural Foods spiked 10.2% in the most recent reporting period to 7.81 million shares. This represents 17.1% of the stock's available float, or 7.8 times its average daily pace of trading.

Technically speaking, it's been a steady slide for UNFI shares over the last 12 months -- down 68% year-over-year. More recently, the stock has come off its Dec. 26 16-year low of $9.24, but ran into resistance at its descending 80-day moving average earlier this month. This trendline hasn't been toppled on a daily closing basis since mid-July.

unfi stock daily chart march 7


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