Wesfarmers shares: Buy, hold, or fold?

The Wesfarmers Ltd (ASX: WES) share price has trailed the S&P/ASX 200 Index (ASX: XJO) through 2022 so far. But does its underperformance leave it squarely in the buy basket?

Well, that depends on who you ask. However, one broker has tipped a near-20% upside for the stock.

The Wesfarmers share price last traded at $46.45, having plunged 4.25% alongside the majority of the market yesterday. That leaves the stock 22.6% lower than it was at the start of the year.

For comparison, the ASX 200 has dived 10% year to date.

Let’s take a look at what experts are tipping for the mammoth retail-focused conglomerate’s stock.

Is now the time to snap up Wesfarmers shares?

Brokers and fundies offer mixed opinions when it comes to predicting the future of the Wesfarmers share price.

Battling for the bears is Alto Capital’s Tony Locantro. He pointed to the company’s full-year earnings, noting its “strong share price amid economic headwinds” appears to represent a “profit-taking opportunity”, courtesy of The Bull.

The company’s after-tax profits slumped 1.2%, or 2.9% excluding significant items, last financial year to $2.35 billion as many of its crown jewel retail businesses struggled.

While Bunnings boasted $2.2 billion of pre-tax earnings – a 0.9% year-on-year increase – those of Kmart Group fell nearly 40% to $418 million and Officeworks’ dropped close to 15% to $181 million amid lockdowns in the first half.

On top of that, Wesfarmers declared a $1 dividend, boosting its full-year offerings 1.1% year-on-year to $1.80 per share.

Goldman Sachs is also sceptical of the company’s future. It has a sell rating and a $38.70 price target on the stock.

Meanwhile, in the bullish corner is broker Morgans. Analyst Alex Lu said the company’s earnings were “comfortably above expectations” in August.

Morgans has also dubbed Wesfarmers’ businesses “one of the highest quality retail portfolios in Australia”, as my Fool colleague James reports. The broker continued:

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

It has slapped Wesfarmers shares with a $55.60 price target and an add rating ­– representing a potential 19.69% upside.

Meanwhile, UBS has a buy rating and a $55 price target on the stock.

The post Wesfarmers shares: Buy, hold, or fold? appeared first on The Motley Fool Australia.

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More reading

• Wesfarmers share price drops 4%: Time to buy?
• Why this top broker is tipping 15% upside for the Wesfarmers share price
• 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

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs. 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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