The Coles Group Ltd (ASX: COL) share price has been a strong outperformer in 2020. While the S&P/ASX 200 Index (ASX: XJO) is down 13.53% this year, Coles shares have climbed 3.91% higher.
But if you’re a long-term investor, you’re probably not too worried about the here and now. So, where will the Coles share price be in 1 year?
Where is the Coles share price headed?
It’s clear that the coronavirus pandemic has boosted supermarket sales this year. Even once the panic buying subsided, supermarkets have been busy with Aussies forced to stay home more.
But it’s harder to forecast sales over the next 12 months. I think it looks like we’re headed for a recession in Australia. Now, technically a recession is not necessarily a disaster but it still has the potential to impact the Coles share price.
A recession is simply 2 consecutive quarters of negative GDP growth. In fact, they’re quite common. But I think a 2020 recession will be tough with so many job losses across a number of sectors.
People tend to spend less in times of uncertainty. While the Coles share price benefits from non-cyclical earnings, even supermarkets get hit by Aussies tightening their spending.
That means that we could see lower earnings over the next 12 months. However, I think Coles will continue to be a strong defensive share.
I don’t think we’ll see spectacular Coles share price growth. But if the ASX 200 moves sideways or down over the next year or so, Coles could still outperform.
I like that Coles provides more concentrated exposure than Woolworths Group Ltd (ASX: WOW) following the former’s November 2018 demerger from Wesfarmers Ltd (ASX: WES).
Foolish takeaway
No one knows where the Coles share price is headed in the next 12 months. In my opinion, it will be trading at or near its current $15.42 valuation.
However, it’s important to consider your time horizon. If you’re investing for the next 30 years, what happens this year or next isn’t a huge concern.
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More reading
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- 3 top ASX dividend shares I would buy for income right now
- 5 things to watch on the ASX 200 on Wednesday
Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET, Wesfarmers Limited, and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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