The Woolworths Group Ltd (ASX: WOW) share price is up 9% year-to-date. Sitting at $39.48 at the time of writing, it's not far off the record all-time high of $43.96 set back in February. Big brokers believe that there is more wriggle room for the Woolworths share price leading into Christmas.
First quarter results
The first quarter update was a catalyst for recent broker updates for the Woolworths share price. This update revealed a 12.3% increase in total group sales in Q1 to $17.9 billion and an 86.7% increase in group e-commerce sales to $1.5 billion.
Its total Australian food sales for the quarter increased 12.9% to $12.0 billion. Sales continued to benefit from COVID-19-driven higher in-home consumption as well as the success of its Disney Ooshies. Sales growth in Victoria was approximately 20% higher in the quarter due to the more stringent restrictions in place. Excluding Victoria, Australian food total sales increased by 10.6%.
In October, Australian food comparable sales growth was in the high single-digits, moderating over the month. For the rest of the calendar year, it expects elevated sales and costs to continue as customers spend more time at home and continue to embrace e-commerce.
Big broker updates for the Woolworths share price
Credit Suisse Group AG raised its Woolworths share price target from $40.43 to $40.80 and retains a neutral rating. It describes the quarterly trading update as solid with online sales channels ahead of competitors. It sees this as an advantage for Woolworths going forward but does raise concern for higher costs.
Macquarie Group Ltd (ASX: MQG) raised its Woolworths share price target from $42.00 to $42.50 and retains an outperform rating. The broker was impressed with its first quarter sales update which were ahead of expectations and better than its main rival Coles Group Ltd (ASX: COL). Macquarie expects a strong Christmas trading period for the supermarket leader.
Morgan Stanley raised its Woolworths share price target from $43.50 to $44.00 and retains its overweight rating. The investment bank reacted positively to its first quarter sales update with growth being better than expected. The liquor segment surprised to the upside but hotels continue to drag on earnings, but offer upside when Melbourne re-opens. Similarly, Morgan Stanley expects a strong Christmas trading period.
UBS AG (USA) retained a buy rating with a $44.00 price target. It didn't change its rating or price target after reviewing the September quarter trading update. The strong performance was in-line with expectations, outlook remains solid but notes higher costs could be a risk to earnings.
Citi retained its buy rating and $44.50 price target. It sees favourable conditions leading into Christmas and Woolworths to outperform supermarket rivals.
The general consensus amongst brokers is a 5–10% upside for the Woolworths share price with anticipated strong earnings growth throughout the Christmas period.
