The party may not be over for the Woolworths Group Ltd (ASX: WOW) share price as JPMorgan upgraded the supermarket giant.
The upgrade means that the Woolworths share price could soon be re-testing last February’s record high of $43.45.
The ASX share has outperformed its archrival. The Coles Group Ltd (ASX: COL) share price has been virtually flat over the past year when the Woolworths share price jumped nearly 14%.
The gain isn’t as impressive as the Metcash Limited (ASX: MTS) share price, which rallied 31% over the period.
Woolworths share price could reach new highs
But the Woolies share price may not have peaked, according to JPMorgan. The broker lifted its recommendation on Woolworths to “overweight” with a 12-month price target of $45 a share.
“Woolworths is likely to sustain market share gains at the expense of Coles due to the tailwinds of local, which could last longer than expected, and online, a structural growth opportunity,” said JPMorgan.
“Coles could accelerate online investment at the expense of dividends but this is unlikely.”
Technology provides sustainable edge
This personally reminds me of how the Commonwealth Bank of Australia (ASX: CBA) share price outruns the other ASX big banks over the long-term.
CBA has a technology edge as it invests more in IT, and that is one of the key reasons why it can keep ahead of the pact over the many years.
But there are three other reasons why JPMorgan is bullish on the Woolworths share price.
Three other reasons to buy the Woolworths share price
First is Woolworths ability to leverage on the Food and Everyday Needs ecosystem. The supermarket giant enjoys superior economies of scale in its food business and can generate incremental revenue streams with not much investment.
Then there is the potential turnaround of its Big W department store business. There are early signs that the struggling business has turned a corner after years of lacklustre performance.
Finally, JPMorgan points to the expected sale of its drinks and hotels division, Endeavour Group.
Not only will the divestment mean a potential capital return for investors who are eagerly eyeing the $2 billion plus of franking credits on Woolies’ balance sheet, but cutting Endeavour Group is likely to drive increased demand in the Woolworths share price from ESG-focused investors.
Talk about a double win!
Where to invest $1,000 right now
When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*
Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.
*Returns as of February 15th 2021
The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
- Why focus could soon shift to dividend upgrades for the Telstra (ASX:TLS) share price – April 13, 2021 12:23pm
- Macquarie (ASX:MQG) just delivered ASX lithium shares a big boost – April 13, 2021 11:29am
- This beaten-down ASX sector could soon be turning the corner – April 12, 2021 4:19pm