Fresh Market's Stock Gets a Big Boost From a Jefferies Upgrade

Fresh Market Inc.'s stock surged 4.7% in midday trade Tuesday, after the specialty grocery retailer was upgraded at Jefferies, which cited an "unsustainably low valuation" and optimism over the new CEO. Analyst Mark Wiltamuth raised his rating to buy from hold, and raised his stock price target to $29, which is 19% above current levels, from $26. Earlier this month, the company named Rick Anicetti as its president and chief executive officer, nearly eight months after saying its previous CEO had left the company. Anicetti had previously spent eight years as CEO of Food Lion grocery stores, which operated more than 1,300 locations. As of Aug. 20, Fresh Market had 176 stores. "In our view, this removes uncertainty and sets the company up for a turnaround," Wiltamuth said. He said at current valuations, "investors seem to be ignoring that [Fresh Market] is debt free, it generates $46 million in free cash flow after funding 12% store expansion, it leads the industry in operating margins and [return on invested capital] and it still has a long runway (9+ years) of store growth ahead," Wiltamuth wrote in a note to clients. The stock has drun up 25% over the past three weeks, but was still down 25% over the past three months, while the S&P 500 has slipped 5.5%.

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