RBC Capital analyst Steven Shemesh initiated coverage of Sprouts Farmers Market with a Sector Perform rating and $107 price target. Between low-single-digit comp sales growth and a “significant” unit growth opportunity, Sprouts has a line of sight into consistent net sales growth into the low-double-digits for the foreseeable future, the analyst tells investors in a research note. However, the firm says that with adjusted EBITDA margins already well above the peer set and a “lofty valuation,” the downside risk outweighs upside potential. As such, it will be looking for a more attractive entry point into the shares.
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