Broker gives its verdict on the Wesfarmers (ASX:WES) share price

Is it too late to buy Wesfarmers' shares?

The Wesfarmers Ltd (ASX: WES) share price is edging higher on Monday afternoon.

At the time of writing, the conglomerate's shares are up 0.3% to $57.95.

This means Wesfarmers' shares are now up a decent 12.5% since the start of the year.

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Is the Wesfarmers share price still good value?

Unfortunately, one leading broker believes the Wesfarmers share price could have peaked for the time being.

According to a note out of Citi from last week, its analysts have retained their sell rating but lifted their price target slightly to $49.00.

Based on the current Wesfarmers share price, this implies potential downside of approximately 15.5% over the next 12 months.

What did the broker say?

While Citi notes that Wesfarmers delivered a result in line with its expectations in FY 2021, it has concerns about the year ahead. This is due to the company cycling a strong sales period and facing lengthy COVID-related store closures.

The broker commented: "Wesfarmers delivered an in line result, reporting $2,421 million in underlying NPAT for FY21. Store closures and cycling of a strong sales base presents challenges in FY22e."

In addition, Citi highlights that Wesfarmers' retail businesses are facing a number of headwinds.

It explained: "The result featured many topics familiar to retailers: supply-chain disruptions, rising freight and commodity costs, transition to online, and increasing investment in digital and automation."

And while it was pleased with its capital return announcement, it simply isn't enough for a more positive rating due to the current Wesfarmers share price valuation.

Citi concluded: "The company announced a $2.3 billion capital return program. We upgrade earnings and Target Price to $49.00 on better-than-expected result from Kmart Group but maintain Sell on valuation grounds."

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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