Is the Coles (ASX:COL) share price a buy in the lead up to Christmas?

Is it time to buy Coles shares?

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a happy, smiling woman rides on the back of a trolley down the aisles of a supermarket.

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The Coles Group Ltd (ASX: COL) share price has been on a positive run in recent weeks.

Since this time in September, the supermarket giant’s shares have climbed over 6%.

This compares favourably to a broadly flat S&P/ASX 200 Index (ASX: XJO) over the same period.

Can the Coles share price keep rising?

The good news is that a number of brokers believe the Coles share price can still climb higher from here.

One of those is Morgans. According to a recent note, the broker has put an add rating and $19.90 price target on the company’s shares.

Based on the current Coles share price of $18.07, this implies potential upside of 10% for investors over the next 12 months.

In addition, the broker has pencilled in a fully franked dividend of 61 cents per share in FY 2022. This brings the total potential return to approximately 13.5%.

What did the broker say?

Morgans was pleased with Coles’ performance in the first quarter. Both its Supermarkets and Liquor businesses delivered like for like (LFL) sales results ahead of the broker’s expectations.

The broker commented: “Supermarkets LFL sales increased 1.4% (vs MorgansF +0.1%) driven by ongoing at-home consumption with NSW, ACT and VIC in lockdown during the quarter and strong online growth, while the picnicware campaigns resonated with customers. […]  Liquor LFL sales increased 1.4% (vs MorgansF -1.6%) despite cycling elevated COVID-driven growth of 17.8% in the pcp.”

This ultimately led to the broker upgrading its earnings forecasts, which it feels has left the Coles share price trading at an attractive level.

Morgans concluded: “COL is a defensive business with strong market positions and a healthy balance sheet. While Supermarkets and Liquor sales growth is likely to moderate as economies reopen and the risk of lockdowns decrease due to higher vaccination rates, trading on 23x FY22F PE and 3.5% yield we continue to see the stock as offering good value.”

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

Before you consider Coles, you'll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Coles wasn't one of them.

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*Returns as of January 13th 2022

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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