Despite the Whole Foods Market Inc.'s (WFMI) ugly 3rd quarter results and equally bad guidance, we are focusing on the company's long-term growth potential and maintaining our Buy rating on Whole Foods. The company is focusing on controlling costs, scaling back new store openings, working to integrate Wild Oats stores into the mix, improving free cash flow, and operating in a weak consumer environment. This focus on operational improvements will be long-term positive for Whole Foods.

Whole Foods is the leader in the natural foods marketplace with 2% of the market. We think the company is well positioned to benefit from the positive, long-term trends in the organic foods sector. Their products appeal to consumers interested in healthy living as well as those who enjoy paying a premium for a superior shopping experience.

While fewer people have the discretionary income to pay up for groceries, this should turn out to be a short-term problem. We continue to believe that the shift to buying organic and natural foods is a long-term trend and companies in that sector will be able to deliver better growth than its industry counterparts. That's because organic foods make up just 5% of the retail grocery industry.

WFMI shares are down about 80% in the last 12 months. We think its current price represents an attractive buying opportunity for long-term investors. Our target price of $15 is 16x our fiscal 2009 EPS estimate of $0.95.