The Woolworths Group Ltd (ASX: WOW) share price has been a positive performer in 2020.
Since the start of the year, the retail conglomerate’s shares are up a solid 9%.
Can the Woolworths share price go higher from here?
One broker that believes Woolworths shares are fully valued now is Goldman Sachs.
This morning the investment bank reiterated its neutral rating and $39.90 price target.
This price target implies potential upside of 1% over the next 12 months excluding dividends and approximately 3.5% including them.
What did Goldman Sachs say?
Goldman Sachs recently met with Woolworths’ management and notes that there were a few key takeaways from the meeting.
One was that inflation has started to ease but continues in categories other than fresh. This has led to downtrading in categories like red meat, but premiumisation continues in categories like beer, wine, and spirits.
Pleasingly, competition remains rational, with most retailers passing through inflation to customers. Woolworths hasn’t seen much of a shift towards value, except in certain demographics and geographies. Promotional programs are back to prior levels
In respect to its online business, Goldman advised that management noted good take-up of the subscription model with reasonable retention. Work is being undertaken to unlock more delivery windows and capacity. Its micro fulfilment centres are in the early stages but are showing good signs so far.
Another key takeaway was the improving performance of its BigW business. It notes that the closure of speciality stores during lockdowns led to customers coming back into BigW. Management expects BigW to gain some of the share that it had lost in recent years.
So why isn’t Woolworths a buy?
Given this positive feedback, investors may be wondering why Woolworths is not being rated as a buy.
The reason for this is its current valuation, particularly in comparison to rival Coles Group Ltd (ASX: COL).
The broker commented: “WOW is delivering a consistent performance across online and in-store and also looks well positioned as further capacity is made available for online. The prospect of capital management over the next 12 months should also provide support for the stock, despite its elevated P/E multiple versus COL.”
It currently has a buy rating and $20.50 price target on Coles’ shares.
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of June 30th
More reading
- This dividend share has the most franking credits on the ASX
- Woolworths (ASX:WOW) opens new Sydney store customers can’t go to
- Goldman says buy the Metcash (ASX:MTS) share price ahead of next week’s results
- Why healthcare, tech and consumer staples shares underperformed the ASX 200 in November
- ASX 200 Weekly Wrap: ASX 200 on track for a top month
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
The post Is the Woolworths (ASX:WOW) share price good value? appeared first on The Motley Fool Australia.
from The Motley Fool Australia https://ift.tt/33ZxW7I
Leave a Reply