RBC Capital Markets believes the Sprouts Farmers Market, which has fallen 36% over the past three months, now has room to recover by about half. The bank upgraded the organic grocery chain’s stock to outperform its sector, but lowered its price target to $148 from $176. Analyst Stephen Shemesh’s new stock price forecast suggests a 44% upside for the stock from where it is trading today. The idea is that Sprout, which has fallen 24% in the last month alone, has fallen to the point where it could be sold at an attractive entry point for investors. SFM YTD Mountain SFM YTD Chart “Since peaking in June, SFM stock has fallen ~42%, underperforming its grocery store peers by ~31% and the market by ~54% over that period,” Shemesh wrote. “With the stock currently trading at about 9 times our 2027 adjusted EBITDA forecast (about 15 times P/E), the harsh comparisons (slower same-store sales) are already baked into the stock price, and concerns about recent promotional activity may be overblown. In the medium term, analysts believe same-store sales growth could rise to between 4% and 5%, compared to an average of 3% from 2015 to 2019. One key change that could fuel this growth is Sprouts’ new commitment to driving innovation nationally across all divisions. “We believe this is a key catalyst for improving product relevance and fostering a culture built on novelty/differentiation (SFM launched 7.1k new SKUs in 2024). At the same time, the company has advanced supply chain efficiency (i.e., farm-to-shelf time) and ultimately improved produce freshness,” he wrote. Sprouts is also making investments to upgrade its real estate while improving its marketing. About 85% of its marketing spend before the pandemic was limited to paper flyers, but since then Sprouts has invested more in its digital efforts, “focusing on higher-attribution digital advertising, and we expect to see further benefits as the loyalty program rolls out nationally,” Shemesh added. Another driver is our various delivery partnerships, including programs with Instacart, Doordash, and UberEats. Meanwhile, a catch-up in organic food sales could bring disproportionate profits to Sprouts compared to traditional grocers. (Learn the best strategies for 2026 from inside the NYSE with Josh Brown and others on CNBC PRO Live. Tickets and information here.)
