Written by Finbox.io
United Natural Foods, Inc. (NasdaqGS: UNFI) shares have taken a big hit following news of Amazon’s acquisition of Whole Foods. However, this may be completely overblown leading to significant upside in the stock’s current share price. Either way, investors should expect to gain further understanding around the acquisition’s potential impacts when management reports earnings on Wednesday after the markets close.
Why Shares Fell-Off
The company’s shares last traded at $35.77 as of Friday, September 8, down 25% year-to-date and 13% since the company last reported mixed earnings on June 6th. In fact, a significant portion of the recent losses came on June 16th, when the stock dropped 14% immediately following news of Amazon’s (NasdaqGS: AMZN) acquisition of Whole Foods.
While United Natural Foods remains a supplier to Whole Foods, the acquisition left investors concerned as to how the relationship will progress with Amazon now entering the picture. However, the concern may have been overblown as new details continue to emerge in the aftermath of the acquisition.
Whole Foods Acquisition Concerns Overblown?
Loop Capital’s Andrew Wolf has been highly involved with updating investors on new developments in the aftermath of the Whole Foods acquisition. First on June 23rd, Wolf spoke with UNFI management and then reiterated his buy rating. He noted that United Natural Foods has a supply contract with Whole Foods through 2025 and added that “It would take Amazon many years to replicate United Natural Foods direct-store-delivery network if it chose to do so.” According to United Natural Foods management, Whole Foods does not have the capacity or buying power to enable them to self-distribute.
Then on July 5th, Wolf followed up by stating that United Natural Foods could actually be a potential Amazon acquisition target. He noted that in the food space, Amazon is more likely a “buyer rather than a builder.” Amazon is not interested in moving into the grocery store business on its own through a trial and error process which could take multiple years. Rather, Amazon is more likely to make further acquisitions to streamline this effort.
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