Analyst Edward Kelly of Wells Fargo maintained a Sell rating on United Natural Foods (UNFI – Research Report), with a price target of $25.00.
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Edward Kelly has given his Sell rating due to a combination of factors affecting United Natural Foods. Despite the company’s progress in improving execution and showing positive trends in healthy eating, the stock’s valuation is not particularly attractive. The company’s recent financial performance, including a strong second-quarter update and raised EBITDA guidance, indicates some optimism. However, the persistent challenges in gross margin compression and the ongoing mix pressure raise concerns about the sustainability of these improvements.
Furthermore, while the company is making strides in operational efficiency and productivity, the wholesale grocery business faces secular headwinds that the market might be underestimating. The current valuation, at 31 times the midpoint of fiscal 2025 EPS guidance and 6.5 times EBITDA, suggests that the stock is priced at a premium, which may not be justified given the existing challenges. As a result, Edward Kelly believes that the stock’s potential downside risks outweigh the upside, leading to a Sell recommendation.
According to TipRanks, Kelly is a 5-star analyst with an average return of 7.6% and a 63.42% success rate. Kelly covers the Consumer Defensive sector, focusing on stocks such as Kroger Company, Walmart, and Albertsons Companies.