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Whole Foods Stock Analysis – Should you spend your Whole Paycheck?


May.19.2017

Whole Foods is a trendy grocery store that brands itself as healthy and high-quality, and the go-to choice of urban, high-income individuals who want to eat well. Groceries at Whole Foods is on the higher end of the price spectrum, and its patrons and non-patrons have endearingly nicknamed it “Whole Foods, Whole Paycheck”. Let us understand Whole Foods stock better with a Whole Foods stock analysis.

 

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1- Fundamental Points

Who are they?

Austin, Texas-based Whole Foods (NASDAQ: WFM) is a high-end grocery store that offers a range of healthy and organic products for consumers who value these qualities. Whole Foods have over 400 stores in United States, and had a target of reaching 1200 stores across its various locations. However, in the first quarter of 2017, after a year of declining sales, Whole Foods planned to close nine stores, namely in California, Colorado, Chicago, New Mexico, Utah, Arizona, and Georgia.

Whole Foods stock analysis

On a brighter note, Whole Foods introduced an in-house brand concept store, 365 by Whole Foods. People who shop at Whole Foods regularly will notice that they have their own brand—365 by Whole Foods—that is significantly lower priced than the other brands they carry. A selling point of this new brand is that consumers do not have to sacrifice quality for cost. They also have great natural and organic options under this brand as well. Personally, I reach for staples like 365’s sugar and butter, and I really do think they are of terrific value and quality. The first wave of 365 stores are already opened across America, and more store openings are underway for 2017.

Who are their competitors?

Whole Foods most direct competitors are Phoenix, Arizona-based Sprouts Farmers Market (NASDAQ: SFM), and Monrovia, California-based Trader Joe’s, who also have a focus on more natural and organic products. Although larger supermarkets like Cincinnati, Ohio-based Kroger, Gates, New York-based Wegmans, and American Falls, Idaho-based Safeway have started seeing opportunities in natural and organic goods.

Good to know: Whole Foods Market’s earnings date for this year is July 25, 2017 - July 31, 2017

What are they doing differently?

Whole Foods Market were the first to ride on the wave of the healthy, natural, and organic eating lifestyle. However, many of their competitors have noticed this opportunity. Some have nosedived into this trend, others already have a foot in the door. Despite this, Whole Foods still have a strong foothold in this market, and they are still one of the largest players in the industry.

Whole Foods stock analysis

They recently launched a lower-end spinoff of their brand, 365 by Whole Foods Market, which is branded as good quality products without burning a hole in one’s pocket. It seems like it has been well received, and they are planning to open more stores this year.

What’s going on in their company structure?

In 2017, Whole Foods had a reshuffling of its company structure. The Company introduced five new independent directors, Ken Hicks, Joe Mansueto, Sharon McCollam, Scott Powers, and Ron Shaich. The Company also appointed Gabrielle Sulzberger as the new Chair of its Board of Directors, and appointed Mary Ellen Coe as the new Chair of the Nominating & Governance Committee. This shakeup happened after the second largest shareholder of Whole Foods Market, Jana Partners, pressured the action.

Good to know: Whole Foods last dividend was 2% or 0.72 cents per share.

John Mackey is the CEO of Whole Foods Market. He is also the co-founder of the Company.

This brings us to the second point of IDDA for the Whole Foods stock analysis: Technicals.

 

2- Technical Points: Whole Foods Stock Analysis

Looking at the monthly chart, Whole Foods is hanging just above the 50% Fibonacci level, after what seems to be a triple bottom has formed at the 62% Fibonacci level. After which, it shot up and opened above the 50% Fibonacci level and is at $36.81 as of the time of writing. It also seems like the Tenkan and Kijun lines of the Ichimoku Kinko Hyo are about to meet in a crossover. This could be our second buy signal if the Tenkan line does cross above the Kijun line.

Whole Foods stock analysis Whole Foods stock analysis monthly chart

 

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3- Market Sentiment

Now let us take a look at the daily time-frame chart. The price seems to be supported at ab important support at 35.94, which is also the 23.6% Fibonacci level. The bullish market may have topped out at the 38.27 level, which increases the likelihood of a bearish reversal, especially if a break below the 23% Fibonacci level is confirmed. When it does go down, it could be a good entry point, especially if one believes that the shakeup in the board of directors will lead Whole Foods to a better future. 

Whole Foods stock analysis Whole Foods stock analysis daily chart

 

Whole Foods Stock Analysis - Investing Strategy

As the 4th point of the IDDA, you must calculate your risk tolerance before deciding on which investing strategy is suitable for your portfolio. Join us for a free MasterClass to learn more.

In order to make sure Whole Foods is the right asset to add to your portfolio, you must also conduct risk management for both yourself, and the security you are analyzing. The beta of a stock measures it’s volatility or systematic risk in relation to the market’s volatility. As increased volatility comes with increased risk, some believe that the beta of a stock is a good indicator to measure risk. The market has a beta of 1, and if a stock has a beta of 1.3, it means that the stock’s volatility is 30% higher than that of the market’s. Some interpret it as 30% riskier than the market as a whole.

Whole Foods Market has a relatively low beta of 0.54, which means that it is not as volatile as compared to the market. One can interpret it as less risky, or safer, than other stocks in the market. Hence, if you are an aggressive investor with many risky assets, you can consider adding this ‘safer’ or ‘less volatile’ stock to your portfolio to diversify your risk.

Here are Invest Diva's calculations for important approximate levels, with regards to the Whole Foods stock analysis.

Support Levels Turning Point Resistance Levels

28.40

37.03

39.74

35.94

38.27

41.56

 

As an Invest Diva you should be able to put the 3 and 4 together and develop a strategy suitable for your portfolio and risk tolerance at this time. For further help, and if you want to chat with me regarding your trades, join our investing group here. It's awesome!!

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Best of luck!

Cherie Koh

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