(FORTUNE Magazine) – WHAT WE SAID

Last spring we argued that Whole Foods (WFMI), the organic-food retailer, looked like a bargain after its fast-climbing shares dropped 17% to $63 on two consecutive earnings misses (April 3, 2006). We were concerned about the stock's high multiple of 45 times estimated 2006 earnings. But we cited Banc of America Securities analyst Scott Mushkin's view that the stock could hit $82.50.

WHAT HAPPENED

Turns out that Whole Foods was headed for a tough year. The stock rose to $72 in May, but on Nov. 3 it plunged 23%, to $46, on news of slowing same-store sales growth and higher-than-expected costs for opening new stores. The ground shifted again last month, when the retailer announced a deal to acquire rival Wild Oats. Investors loved the idea and sent the stock up 14%, to $52. Some of last spring's bulls are still cautious. Mushkin rates the stock neutral, with a 12-month target of $45. On the other hand, Morgan Stanley's Mark Wiltamuth, who points to Whole Foods' history of successful acquisitions, has stuck to his overweight rating. "This transaction is a big shot in the arm in terms of fuel for future earnings growth," says Wiltamuth, who raised his one-year target to $66 and the two-year to $83.