Could the Coles (ASX:COL) share price hit $20 by the end of 2021?

Is it time to buy Coles shares?

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A woman ponders over what to buy as she looks at the shelves of a supermarket

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The Coles Group Ltd (ASX: COL) share price has been on form over the last six months.

During this time, the supermarket operator’s shares have climbed 11% to $17.53.

Could the Coles share price climb to $20 by the end of the year?

The good news for investors is that it may not be too late to buy Coles shares.

According to a recent note out of Morgans, its analysts have an add rating and $19.80 price target.

Based on the current Coles share price, this implies a potential upside of 13% for investors before dividends.

And with Morgans forecasting a fully franked 61 cents per share dividend in FY 2022, the potential return on offer stretches to over 16%.

In light of the above, the team at Morgans appear to believe there’s a chance the Coles share price could be trading around the $20 level by the end of the year.

Why is Morgans positive on the company?

Morgans is positive on the Coles share price due to its belief that it offers far more value than Woolworths Group Ltd (ASX: WOW).

Its analysts also believe that Coles is well-placed to benefit from a number of COVID tailwinds such as working from home.

The broker recently 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. This will be beneficial for the major supermarket operators. We continue to see COL as offering better value than WOW.

COL is a defensive business with strong market positions and a healthy balance sheet. Trading on 24.6x FY22F PE and 3.3% yield we continue to see the stock as offering good value and maintain our Add rating.

Should you invest $1,000 in Coles right now?

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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 COLESGROUP DEF SET. 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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