Is now a good time to buy Woolworths (ASX:WOW) shares?

Could it be a good time to buy shares of Woolworths Group Ltd (ASX: WOW)? The Woolworths share price has been rising in recent months.

In just the last month the Woolworths share price has risen by almost 6%. Since 3 May 2021, Woolworths shares have risen by 23%.

What has happened recently?

COVID-19 has been a very strange and difficult time for many people and businesses.

Last year during the original onset of COVID there was a large amount of demand for food at supermarkets as households stocked up on necessities.

But that was last year.

COVID-19 is again affecting many areas of the country. Sydney, Melbourne and Canberra are under lockdowns currently.

This might be reducing demand for food from non-supermarket establishments and increasing it for companies like Woolworths, Coles Group Ltd (ASX: COL), and Metcash Limited (ASX: MTS) which supplies IGA.

It's reporting season in August 2021 and investors will probably get a trading update about what's happening in the current environment. But that's not until 26 August 2021.

Aside from the demerger of Endeavour Group Ltd (ASX: EDV), the last material update that the market got was for the 13 week period to 4 April 2021.

FY21 third quarter update

In that update, Woolworths said that its quarterly group sales were up 0.4% to $16.57 billion. That includes group e-commerce sales of $1.34 billion, an increase of 64.2% year on year.

Woolworths' third quarter of FY20 was a strange time. The first half of that quarter was normal living, the 'before' time. Then the second half of that quarter was when supermarkets went crazy. That's why Woolworths Australian food sales saw FY21 third quarter sales in the first seven weeks rise 8.2%, but the following six weeks showed a decline of 9.6% against the last six weeks of the FY20 third quarter.

Overall, Australian food sales were down 0.7% in the third quarter. New Zealand food sales were down 6.9% in New Zealand dollar terms. Big W sales jumped 18.3% for the quarter, which is the only remaining major non-food business.

Time will tell what the sales have been like in the fourth quarter of FY21 and in the weeks after June 2021.

Is it time to look at Woolworths shares?

Brokers are not particularly hopeful about the Woolworths share price.

For example, Citi has a price target of $37.60 for the supermarket business. That suggests the shares could drop around 7.5% over the next 12 months. Citi thinks that it might be a better performer than Coles.

The broker Credit Suisse goes even further, rating it as a sell with a price target of $32.92. That means that the broker thinks the Woolworths share price might fall almost 20% over the next 12 months if it's right. Valuation is a key reason for that rating.

According to Credit Suisse, Woolworths is trading at 26x FY21's estimated earnings with a grossed-up dividend yield of 3.75%.