The Coles Group Ltd (ASX: COL) share price has been out of form in 2021.
Since the start of the year, the supermarket giant's shares have fallen almost 7%.
Is the Coles share price in the buy zone?
One leading broker sees the weakness in the Coles share price this year as a buying opportunity.
According to a recent note out of Morgans, its analysts have an add rating and $19.80 price target on the company's shares.
Based on the current Coles share price of $17.28, this implies potential upside of almost 15% over the next 12 months before dividends.
But the returns don't stop there. Morgans is forecasting a fully franked dividend of 61 cents per share in FY 2022. If you include this, the potential return on offer stretches to over 18%.
What did the broker say?
Morgans is a fan of Coles due to its strong market position and the belief that consumers will continue to stay at home due to COVID-19. The broker expects this to support solid sales across its 800+ store supermarket network.
And while rival Woolworths Group Ltd (ASX: WOW) will benefit from the same trends, the broker notes that its shares trade on significantly higher multiples. As a result, it sees far more value in the Coles share price at present.
Morgans commented: "While vaccines are being rolled out across Australia, we think people will continue to spend more time at home due to the ongoing risk of COVID flare-ups with the working-from-home trend also likely to stay for some time (eg, Sydney and Melbourne remain in lockdown indefinitely)."
"This will be beneficial for the major supermarket operators. We continue to see COL (~24x FY22F PE and ~3.5% yield) as offering better value than WOW (32x FY22F PE and 2.5% yield)," it added.
Overall, it feels this makes the Coles share price a good option right now.
