While that share price growth has slowed, supermarket shares have held their gains. The Coles share price is up 22.9% this year while Metcash Limited (ASX: MTS) shares have climbed 8.6%.
So, what do tightening coronavirus restrictions mean for the Coles share price in August?
What could move the Coles share price in August?
There are a couple of big factors here. First of all, let’s look at the tightening restrictions.
Victoria has implemented tougher lockdown restrictions until at least 13 September while other states are also on high alert.
That means that non-discretionary and ‘essential’ services like supermarkets could do well. Given supermarket shopping is one of the few permitted reasons to leave the home, Coles’ earnings could climb.
On top of the current restrictions, Coles is expected to release its full-year result on 18 August.
That FY20 result will only reflect the period up to 30 June 2020. However, I think we’ll still see some bumper earnings numbers with signs that could persist into FY21.
That means the Coles share price is one to watch this month. If we see better than expected earnings, I’d expect it to be climbing higher.
However, if investors think that this result is just a once-off, I would expect a decent share price fall. After all, investors are interested in the present value of future cash flows, not what’s happened in the past.
Should you invest in Coles?
There does appear to be some good benefits from holding Coles shares in 2020.
For one, the company’s earnings are non-cyclical and should remain steady. That could be good news for the Coles share price stability and maybe even a dividend.
If COVID-19 restrictions continue to drag on, next year’s earnings could even receive a boost.
I’m not sure if the Coles share price is cheap after climbing 8.6% higher this year but I won’t be betting against it in the current climate.
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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET. 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.
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