Of The Potential Paths Forward For Whole Foods, A Takeout Seems Most Likely

Amid Whole Foods Market, Inc. WFM recent notable struggles, M&A speculation continues to swirl ahead of the company’s first-quarter report set for Wednesday.

Analysts at Oppenheimer believe comps will once again fall short of Wall Street forecasts and will be watching updated fiscal-year 2017's comp guidance closely. Comps are expected to decline 3 percent in the quarter, according to consensus estimates.

Oppenheimer has elevated Kroger Co KR, a company that has been often named in potential Whole Foods Takeover talks, as its top grocery pick.

The recent activist stake in Whole Foods by Jana Partners in April has been boosting the talks of a potential takeover, although there has been no word on whether both sides have formally met. Grocery store chain Albertsons has also been mentioned in acquisition rumors.

Jana partners has hired Evercore as an advisor to review business operations including exploring a possible sale, according to Oppenheimer.

“Following a >25 percent rally off the recent lows and prospects for still challenging comp trends, we have less conviction on how shares could react. Short interest remains quite elevated even after the activist stake and M&A speculation. Fundamentally we believe shares are ahead of themselves, suggesting risk of profit-taking,” said Oppenheimer Monday.

Oppenheimer has an Outperform rating on Whole Foods with a 12–18-month price target at $40.

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