UNITED STATES-ORGANIC COMPANY DOWNGRADED.
Morgan Stanley on Wednesday downgraded shares of Whole Foods Market Inc. saying the company is still considered too high-end for the recession.
Analysts Mark Wiltamuth wrote in a research note that a Morgan Stanley survey shows shoppers still view Whole Foods as too expensive and are reducing their spending throughout the store. He said same-stores sales, or sales at locations open at least a year, will be key to establishing the stock’s value but estimate they could be down for all of 2009.
Morgan Stanley downgraded Whole Foods shares to "Underweight" from "Equal-weight" and lowered their price target to $15, which suggests downside of 23 percent from its closing price Tuesday of $19.46.
Shares of Whole Foods have more than doubled since the beginning of 2009 but fallen 46 percent since reaching a 52-week high of $36.03 in May.
"We think (Whole Foods) shares have moved too far too fast; we see a correction ahead," Wiltamuth wrote.
He did note, however, that Whole Foods has room to cut costs. The Austin , Texas company has made some reductions but after posting 11 years of higher same-store sales with little operating margin improvement, he noted there is still room for cost cutting.
Shares of Whole Foods rose 28 cents to $19.74 in afternoon trading Wednesday amid a larger market uptick.