Why this top broker is tipping 14% upside for the Wesfarmers share price

It’s been a solid start for the S&P/ASX 200 Index (ASX: XJO) so far this Tuesday. At the time of writing, the ASX 200 has added a healthy 0.54% and is now over 7,000 points. But let’s talk about the Wesfarmers Ltd (ASX: WES) share price.

Wesfarmers shares are having an even better time than the overall market over this session thus far. The ASX 200 industrial and retail conglomerate has added a pleasing 1.41% so far today to $48.495 a share.

Saying that, the Wesfarmers share price has still been a bit of a laggard in recent months. The company remains down a painful 18% or so over 2022 thus far. That doesn’t compare too well with the ASX 200’s loss of 6% year to date. The company also remains down 15% over the past 12 months.

So what might be next for Wesfarmers shares as we stand here in September 2022?

Well, let’s discuss what one ASX broker reckons.

Is the Wesfarmers share price a buy today?

ASX broker Morgans is indeed calling Wesfarmers a buy today. As my Fool colleague James covered on the weekend, the broker has a buy rating on the company at present, complete with a 12-month share price target of $55.60. That target implies a potential upside of around 14.4% over the coming year.

Morgans describes Wesfarmers as having “one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Wesfarmers Consumer Officeworks”.

Here’s some of what the broker said on its buy rating:

The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes.

We see the pullback in the share price as a good entry point for longer term investors.

In terms of dividends, Morgans is also anticipating some big things. The broker has pencilled in fully franked dividends of $1.82 per share for FY23 and $1.89 for FY24. That compares to the $1.80 the company will shell out for FY22.

So no doubt that would all be very welcome news for Wesfarmers shareholders. But we’ll have to see what happens.

At the current Wesfarmers share price, this ASX 200 retail share has a market capitalisation of $54.99 billion, with a dividend yield of 3.51%.

The post Why this top broker is tipping 14% upside for the Wesfarmers share price appeared first on The Motley Fool Australia.

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More reading

• How I’d invest $10,000 in ASX shares if I were saving for a house
• Brokers rate these ASX dividend shares as buys
• Buying Wesfarmers shares? Here’s why the company says Bunnings can continue to outperform
• Could these ‘little’ businesses be a secret weapon for Wesfarmers shares?
• Are ‘cracks starting to show’ for ASX 200 retail shares?

Motley Fool contributor Sebastian Bowen has positions in Wesfarmers. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has positions in and has recommended Wesfarmers Limited. 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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