The Wesfarmers Ltd (ASX: WES) share price was a very strong performer on Tuesday.
The conglomerate's shares raced a remarkable 12% higher to end the day at $35.89.
Is it too late to buy Wesfarmers shares?
Whilst Wesfarmers is perhaps no longer the bargain buy it was earlier this month, I still see value in its shares at the current level.
Especially given its solid long-term growth potential, defensive qualities, strong balance sheet, and attractive dividend yield.
In respect to the latter, I estimate that Wesfarmers shares offer investors a fully franked ~4% dividend yield at the current level.
One broker that isn't as bullish is Goldman Sachs. According to a note out of the investment bank, its analysts have retained their neutral rating and $37.70 price target on its shares.
Based on its last close price, this equates to potential upside of 5% over the next 12 months excluding dividends. Including them, this potential return stretches to almost 9%.
What did Goldman say about Wesfarmers?
Goldman Sachs has been busy adjusting its forecasts to account for a potential recession in Australia and the closure of stores in New Zealand due to the coronavirus outbreak.
The broker explained: "EBIT forecasts are revised by -5.4% and -6.0% respectively over FY20 and FY21. EPS is revised -5.4% to $1.71 in FY20 and -6.2% to $1.65 in FY21. Post these downgrades, WES is currently trading at 21.7x FY21 PE and offering a 3.7% fully franked dividend, on our estimates."
"We like WES' relative balance sheet strength and ability to trade through an extended period of store closures. The stock currently trades at 21.7x P/E vs. the market at 20.8x. We maintain our Neutral rating on WES," the broker concluded.
It is worth noting also that this broker note was released prior to its decision to offload a 5.2% stake in Coles Group Ltd (ASX: COL). This stake is worth approximately $1.1 billion and will give its balance sheet a big boost.
