Why is the Coles share price tumbling today?

The Coles Group Ltd (ASX: COL) share price is trading lower on Wednesday.

At the time of writing, the supermarket giant’s shares are down almost 3% to $16.83.

Why is the Coles share price falling?

There have been a couple of catalysts for the weakness in the Coles share price on Wednesday.

The first is broad market weakness following a shocking night of trade on Wall Street.

US stocks had their worst session in over two years after economic data revealed that inflation isn’t easing. This defied expectations and sparked fears that aggressive interest rate hikes will be required.

What else?

Also weighing on the Coles share price has been a broker note out of Goldman Sachs this morning.

According to the note, the broker has downgraded the company’s shares to a sell rating with a reduced price target of $15.60.

The broker made the move on the belief that Coles could lose market share due to being a laggard in respect to digital transformation. It also fears that the company’s margins could be pressured as it enters into a high investment cycle.

Goldman explained:

Downgrade COL from Neutral to Sell with new TP of A$15.60/sh, implying 9.5% share price downside due to laggard in digital transformation resulting in market share losses and entrance into high investment cycle for digital and supply chain pressuring margins over FY23/24. Our FY23-25e NPAT is cut by 2.4%-8.9% to reflect lower comp growth as higher digital transformation related opex. Our TP implies FY24 P/E of 20.0 vs historical average of 21.5.

The post Why is the Coles share price tumbling today? appeared first on The Motley Fool Australia.

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More reading

• 5 things to watch on the ASX 200 on Wednesday
• Supermarket shakeup: Do Coles shares offer better dividends than Woolworths?
• Top ASX dividend shares to buy in September 2022
• Why is top broker Citi tipping 17% upside for the Coles share price?
• Are Coles dividends better than a savings term deposit?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 COLESGROUP DEF SET. 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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