The Wesfarmers Ltd (ASX: WES) share price has followed the lead of the market and is trading lower this afternoon.
At the time of writing the conglomerate's shares are down 1% to $34.44.
Is this decline a buying opportunity?
Whilst I think it could be a buying opportunity, one leading broker doesn't believe it is.
A note out of Goldman Sachs this morning reveals that its analysts have retained their neutral rating and $32.30 price target on Wesfarmers' shares following its Bunnings Investor Day event.
In January the broker downgraded Wesfarmers' shares to a neutral rating from buy due to concerns over the outlook for the Bunnings business both in the short and long term.
In the short term, Goldman has concerns over the impact of unfavourable weather on its performance and cyclical trends in the housing sector continuing to look soft. Whereas in the long term the broker fears that the large format home improvement market could reach a saturation point in the medium term, limiting its store network expansion.
According to this morning note, at the investor day event, the company identified a number of key growth opportunities. These include categories such as Kitchen, Bathrooms, Window Furnishings, and Flooring.
Other areas of focus include the expansion into innovative categories, expanding the service offering, the expansion of its commercial and trade category, and the launch of a fully transactional Bunnings website.
Whilst the broker was pleased to see the company expanding its target market, especially given its view that it has limited store network growth headroom, Goldman said that the update "lacked any material updates on the trading conditions or significant structural change that would require revision to our existing forecasts."
What now?
Whilst I think that Goldman Sachs makes some valid points, it hasn't put me off the company. I think Wesfarmers is well positioned for growth and has the balance sheet strength to make some major earnings accretive acquisitions in the coming 12 months.
As a result, I continue to see it as a good investment option and would pick it ahead of rival Woolworths Group Ltd (ASX: WOW).
In addition to Wesfarmers, I think the spun off Coles Group Ltd (ASX: COL) business is looking very attractive after a sharp pullback in its share price.
