The Coles Group Ltd (ASX: COL) share price was up almost 2% on Wednesday following its third-quarter sales results. Its share price momentum has carried over to today, up 3% to $16.36.
Brokers have analysed Coles' performance, with multiple updates coming out today. We take a closer look.
Brokers weigh in on the Coles share price
Citi sees a turnaround for Coles
Citi believes Coles has reached an inflection point for its market share and sales differentials, where the worst may be behind the supermarket giant. The broker notes that like-for-like sales growth could continue to be volatile due to COVID-19. However, a faster than expected fall in COVID-19 costs could act as a hedge to operating leverage. Citi lowered its Coles target price from $19 to $18 but upgraded its rating from neutral to buy.
Credit Suisse upgrades rating to outperform
Credit Suisse believes there are early signs of sales stabilising and normalisation in consumer shopping behaviour. This would translate to greater shopper frequency, increased Sunday shopping, and better performance at shopping centres. The broker thinks that the Coles share price valuation is undemanding, upgrading its rating from neutral to outperform with an $18.19 target price.
Sales below Macquarie's expectations
Supermarket sales came in below Macquarie's expectations for the March quarter. The broker believes May and June will be more challenging as the prior corresponding period (pcp) was when tailwinds such as lockdowns and abnormal at-home consumption trends commenced. Macquarie retained a neutral rating with a $17.30 target price.
Morgan Stanley is bullish on results
Morgan Stanley believes the third-quarter like-for-like sales declines should be viewed in the context of a 13% increase on the prior corresponding period. While the results are a downgrade against consensus views, the broker believes this has already been reflected in Coles' recent share price performance. Morgan Stanley is overweight on Coles shares with a $20.25 target price.
Below Morgans' expectations but rating maintained
The third-quarter results were weaker than what Morgans was expecting. However, it is positive on management commentary regarding a normalisation in consumer behaviour in the first few weeks of the fourth quarter. The broker observes that online sales remain strong with sales jumping 49% and a continued focus on its own brand as a point of differentiation.
Morgans maintained its add rating and decreased its target price from $19.45 to $18.50.
