Can the Woolworths (ASX:WOW) share price hit $45 by the end of 2021?

Can the Woolworths share price reach $45 before the end of the year?

| More on:
Woman shopping at a retail store.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Is it possible that the Woolworths Group Ltd (ASX: WOW) share price could rise to $45 by the end of 2021?

At the moment the supermarket giant is sitting at around $40. In the middle of August 2021 it had reached up to $42.

But can it rise by approximately 12.5% before the end of the 2021 calendar year?

Broker opinions on the Woolworths share price

Most brokers don't think Woolworths is a buy right now, with several price targets around the $40 mark. That effectively means that they don't think that Woolworths shares are going to go anywhere over the next 12 months.

But there are a couple of opinions that are a bit different than that.

Credit Suisse has a sell on the company, with a price target of around $31. That suggests the broker believes that Woolworths shares are going to drop by more than 20% over the next 12 months. It thinks it's overvalued for its expected earnings and potential (limited) growth. Using Credit Suisse's forecast, the Woolworths share price is valued at 32x FY22's estimated earnings.

But there is a broker with a $45 price target – Ord Minnett. However, that's where the broker sees the Woolworths share price being in 12 months, not in the next two or three months. The thought is that supermarkets could see continued elevated levels of sales for longer because of COVID-19.

How is the supermarket business trading?

The FY21 announcement was the latest trading update that investors received.

FY21 total group sales were up 5.7% to $67.3 billion in FY21, with e-commerce sales up 58.1% to $5.6 billion. Group earnings before interest and tax (EBIT) increased 13.7% to $3.66 billion, whilst group net profit rose 22.9% to $1.97 billion. Within that, Australian food sales grew 5.4% and the EBIT rose 9% to $2.4 billion.

In terms of FY22, in the first eight weeks, Australian food sales were up 4.5% and Big W sales were down 15.1% (after a strong performance at the start of FY21 and store closures in FY22). For New Zealand, it said the two-year average growth had "continued to improve" with "some benefit to sales from recent lockdowns".

The Woolworths annual general meeting is on 27 October 2021, so investors are likely to get an update for the first quarter of FY22 in that presentation.

Share buy-back to help the Woolworths share price?

When Woolworths announced its FY21 result, it also announced that it was returning $2 billion of capital to shareholders with an off-market share buy-back. The completion of the demerger of Endeavour Group Ltd (ASX: EDV) and repayment of intercompany loans provided a catalyst for a detailed review of capital management options.

The leadership said that this capital return reflected a strong balance sheet and its franking credit balance, whilst allowing it to continue to invest in its businesses.

Woolworths said the buy-back would be done through a tender process.

Motley Fool contributor Tristan Harrison 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 has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Consumer Staples & Discretionary Shares

A couple of friends at a rooftop party enjoying some hot and tasty Domino's pizza
Dividend Investing

Own Domino's shares? Today is pay day!

Eligible Domino’s shareholders can expect some welcome passive income today.

Read more »

Woman looks amazed and shocked as she looks at her laptop.
Consumer Staples & Discretionary Shares

If you'd put $20,000 in this ASX retail stock at the start of 2023, you'd have $134,000 now

This online retailer has executed a remarkable turnaround for its investors.

Read more »

Photo of two women shopping.
Earnings Results

Premier Investments share price jumps 9% on results and demerger plans

The Smiggle and Peter Alexander owner has released its results. How did it perform?

Read more »

a woman with lots of shopping bags looks upwards towards the sky as if she is pondering something.
Consumer Staples & Discretionary Shares

How a potential demerger could deliver a 10% upside for this ASX 200 stock

Investors might have even more reasons to love this ASX 200 stock if rumours are true.

Read more »

A smiling woman sits in a cafe reading a story on her phone about Rio Tinto and drinking a coffee with a laptop open in front of her.
Consumer Staples & Discretionary Shares

Why Goldman Sachs expects market-beating returns from Super Retail shares

Goldman Sachs thinks this retail share could offer big returns for investors.

Read more »

A happy boy with his dad dabs like a hero while his father checks his phone.
52-Week Highs

Why is the A2 Milk share price up 46% year to date and at a 52-week high?

This infant formula company's shares have delivered the goods this year.

Read more »

Happy man on a supermarket trolley full of groceries with a woman standing beside him.
Consumer Staples & Discretionary Shares

2 things I'm waiting for before buying Coles shares

I'm waiting for two things before I add Coles to my share portfolio.

Read more »

Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.
Consumer Staples & Discretionary Shares

If I'd put $5,000 in Wesfarmers shares at the start of 2024, here's what I'd have now

Are investors smiling this year? Let's see how its shares have performed.

Read more »