Are Sprouts Farmers Market Inc (SFM) and Scientific Games Corp (SGMS) Just Blowing Smoke?
New York, NY – GDP INSIDER – 05/11/2014.
This article discusses two companies: Sprouts Farmers Market Inc (NASDAQ:SFM) and Scientific Games Corp (NASDAQ:SGMS)
Sprouts Farmers Market Inc (NASDAQ:SFM) sold off in trading on Friday by 10% to close at $27.23. The chain of 150 specialty grocery stores fell after a weak earnings report. First quarter earnings increased by 11% to $0.25 per share, short of analysts’ $0.27 forecast. Revenue was up by 19% to $857.50 million and it was also short of analysts’ forecast of $870 million. While the quarter was below expectations, the outlook from the management team was somewhat promising. Sprouts Farmers Market Inc plans to open 27 new locations in 2015 and forecasts sales growth of 20% – 22%. The stock continues to trade at 38.9x TTM earnings after the decline in value on Friday. While the company has a strong track record of revenue growth, the valuation is expensive. However, if it can deliver on its growth targets, the stock can move higher. Issues from its first quarter, weather and produce tightness, are not ongoing.
Scientific Games Corp (NASDAQ:SGMS) was also down by almost 10% on Friday (9.3%) to $12.35 after the company fell short in its earnings report. Scientific Games Corporation posted sales of $658 million, a 70% increase year-over-year, in its first quarter. This fell short of the $715 million analysts had forecast. However, it had a loss of $1.01 per share, better than the $1.26 expected by analysts. As with many tech firms, revenue growth outweighs profitability. Despite the EPS beat, the sales miss carried a lot more weight with the Street. The company is a developer of technology-based products and content for the gaming and lottery industry around the world. After the fall on Friday, the stock is down 3% YTD and does not have any technical levels of support. The stock can continue to decline, and we have issued a price target below current levels.
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