The Wesfarmers (ASX:WES) share price is 20% off its all-time high. Is it a buy?

Key Points

• Wesfarmers shares down 20% from its all-time high reached in August last year
• Management signalled tough trading conditions brought on by the pandemic
• Brokers weigh in on Wesfarmers shares highlighting an attractive investment

The Wesfarmers Ltd (ASX: WES) share price has travelled lower in 2022.

When looking at the past month, the conglomerate’s shares have lost ground by 9.54%. In comparison, the S&P/ASX 200 Index (ASX: XJO) has declined by 4.79% over the same time frame.

Below, we take a closer look at what’s been happening with the Wesfarmers share price.

What’s dragging Wesfarmers shares lower?

Investors have been selling off the Wesfarmers share price as the company struggles to navigate its way through COVID-19.

The company reported tough retail trading conditions at its half-year results update in mid-January.

In the release, management advised that its K-mart and Target businesses have been severely impacted by COVID-19 restrictions. This is due to almost 25% of store trading days lost from government-mandated store closures.

On a pleasing note, the group’s overall performance was supported by Bunnings and Wesfarmers Chemicals, Energy & Fertilisers. These segments thrived on the back of trending DIY home projects along with ammonium nitrate demand and favourable LPG pricing.

As a whole, Wesfarmers is forecasting a net profit after tax (NPAT) of between $1,180 and $1,240 million for H1 FY22. This is broadly in line with current consensus expectations.

Nonetheless, the increasing cases of COVID-19 Omicron variant across Australia became a turning point in Wesfarmers shares.

Late last month, the company’s share price reached a 10-month low of $49.84, before staging a mini rebound.

Are Wesfarmers shares a buy?

A number of brokers note weighed in on the company’s shares following the release of its trading update.

American multinational investment bank, JPMorgan recently cut its price target on Wesfarmers shares by 5.3% to $60.60 apiece.

Macquarie and UBS had a similar view, also slashing the outlook by 2.2% to $60 and by 1.7% to $59, respectively.

Based on yesterday’s closing price of $53.64, this implies a potential upside of around 12% for investors.

Wesfarmers share price snapshot

Over the past 12 months, the Wesfarmers share price has moved in circles, posting a loss of almost 3%.

The company’s shares reached a record high of $67.20 in August before treading lower in the months ahead. This represents a fall of more than 20% from where Wesfarmers shares trade today.

Wesfarmers commands a market capitalisation of around $60.82 billion, making it the tenth largest company on the ASX.

The post The Wesfarmers (ASX:WES) share price is 20% off its all-time high. Is it a buy? appeared first on The Motley Fool Australia.

More reading

• Wesfarmers (ASX:WES) threatens to fly the WA coop. Here’s the latest
• Own Wesfarmers (ASX:WES) shares? 2 of its major businesses are wearing new crowns
• Could this signal the next big acquisition for Wesfarmers (ASX:WES)?
• Here’s a deep dive into the historical returns of Wesfarmers (ASX:WES) shares
• What’s happening to the Wesfarmers share price (ASX:WES) this year?

Motley Fool contributor Aaron Teboneras 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 owns and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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