The Woolworths share price is up 10.5% in 2020 and could go higher

The Woolworths Group Ltd (ASX:WOW) share price has been a strong performer in 2020 and has been tipped to go higher still…

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Woolworths Group Ltd (ASX: WOW) share price has been one of the best performing blue chips on the ASX 200 index in 2020.

Thanks to another solid gain on Tuesday, the conglomerate's shares are now up 10.5% since the start of the year.

As a comparison, the Wesfarmers Ltd (ASX: WES) share price is up 6.5% and the Coles Group Ltd (ASX: COL) share price is up 8.4%.

Why is the Woolworths share price up 10.5% in 2020?

Investors have been buying the company's shares this year thanks to the easing of deflationary pressures in the supermarket industry.

Deflation had been weighing heavily on the margins of supermarkets over the last couple of years.

But over the last couple of quarters these pressures have been easing and are putting the supermarkets in a much stronger position.

For example, according to the ABS, during the December quarter the drought led to the prices of meat and seafood products lifting 1.7%, dairy and related products increasing 2.2%, and bread and cereal products by 1.3%.

It looks set to be a similar story during the current quarter due to the bushfires which have devastated parts of Australia.

What else is lifting its shares?

In addition to this, the outlook for interest rates and positive broker notes have supported its shares.

In respect to the former, Woolworths has long been a firm favourite with income investors. So with the cash rate expected to go lower again in 2020, investors hunting for yield are likely to have been attracted to its shares.

Can its shares go higher?

One broker that still believes Woolworths can go higher from here is Macquarie. According to a note out of the investment bank this week, it has upgraded its shares to an outperform rating with an increased price target of $42.40.

This price target implies potential upside of 6% from today's close price.

Macquarie likes Woolworths due to its dominant market position and the prospect of efficiency gains in the coming years.

It also believes the company could undertake capital management initiatives once the Endeavour Drinks spin-off is completed.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Wesfarmers Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Gainers

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Share Gainers

These were the best-performing ASX 200 shares in March

These shares made their shareholders smile in March thanks to some very big gains.

Read more »

Stock market chart in green with a rising arrow symbolising a rising share price.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a massive day for the ASX 200, with a new all-time high recorded.

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Technology Shares

This ASX tech stock rocketed 60% in March! Can it keep on delivering?

After soaring in March, the ASX tech stock is now up 169% since this time last year.

Read more »

A young women pumps her fists in excitement after seeing some good news on her laptop.
Share Gainers

Why Mesoblast, Newmont, Pilbara Minerals, and Platinum shares are jumping

These ASX shares are ending the week strongly. But why?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Share Gainers

3 ASX All Ords shares up 50%+ in March

These ASX shares have been on fire this month. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Share Gainers

Why Mesoblast, Patriot Battery Metals, Sigma, and Zip shares are pushing higher

These shares are having a good session on hump day. But why?

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Fancy font saying top ten surrounded by gold leaf set against a dark background of glittering stars.
Share Gainers

Here are the top 10 ASX 200 shares today

It was back to earth for ASX shares this Tuesday.

Read more »