The Wesfarmers Ltd (ASX: WES) share price has been on a roller-coaster ride this past month, falling 6%.
With the share price falls in rival Woolworths Limited (ASX: WOW) plastered across news mastheads; the owner of Coles, Bunnings Warehouse, Target, Kmart, Officeworks and more, has had a tough trot of late – unsurprisingly.
However, the volatile share price hasn't perturbed Wesfarmers' management from kicking goals operationally. Indeed, Coles is dominating Woolworths in the supermarkets division, Bunnings Warehouse is Australia's best DIY home improvement business; Officeworks is unrivaled, and Kmart and Target are leading the Australian general merchandising market.
There are a couple of blemishes on the conglomerate business, sure. The chemicals, industrials, and resources businesses are points of weakness for Wesfarmers, but they contribute just 8% of sales.
Time to sell?
Despite its market-leading positions, yesterday, analysts at UBS moved to downgrade their price target on Wesfarmers' shares. To justify a drop in their fair value estimate from $43.10 to $41.50, analysts cited competitive pressures for Coles, a revised downgrade in forecast coal prices, and a slowing housing market (which would impact Bunnings). The bank maintained its 'neutral' rating.
Buy, Hold or Sell?
In my opinion, the Wesfarmers share price is expensive. However, I wouldn't sell it because it's undoubtedly a great long-term prospect – I just wouldn't buy in at today's prices. Moreover, perhaps my thinking is the same as the UBS analysts; but I'd like to see how Coles responds to competitive pressures from Woolworths, Aldi, Costco and Lidl before buying in.
Until then, I'm getting my fill of dividends elsewhere…
