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

Are Woolworths shares an opportunity as Christmas gets closer?

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It is getting closer to Christmas. Could the Woolworths Group Ltd (ASX: WOW) share price be an opportunity in the leadup to the festive season?

Woolworths has been through a fairly volatile period over the last couple of years. There was the pantry stocking at the start of the COVID-19 pandemic. Long lockdowns in Victoria and NSW also led to elevated demand for supermarket food.

What do analysts think of the Woolworths share price?

Some analysts are felling pretty negative about the business at the moment.

A few weeks ago, Woolworths released its trading update for the first quarter of FY22.

Both Credit Suisse and UBS rate the supermarket business as a sell after seeing that update.

UBS thinks that there is a slowing down of conditions for the supermarket giants in Australia.

Both Credit Suisse and UBS thinks that costs are going to increase and this could impact profitability.

Price targets on the Woolworths share price

Of the two bearish brokers I’ve mentioned, UBS has a price target of $37 on Woolworths.

Credit Suisse is much more negative. Its price target is just $31.84 – that implies a possible decline of around 20% over the next year if the broker is right.

But not every broker is so negative on the business. Some brokers have price targets that are higher than where it’s currently trading at.

One of the most positive is Ord Minnett, which has a price target of $43 on the Woolworths share price – more than 6% higher than today. The broker still feels the medium-term looks solid for the company.

Differences in profit expectations

How much profit Woolworths is expected to make can lead to a big difference to how much analysts are prepared to say it is worth today and what the price target is.

Using those profit projections, Credit Suisse reckons that the Woolworths share price values it at 34x FY22’s estimated earnings and 31x FY23’s estimated earnings.

But Ord Minnett is much more optimistic, the broker puts Woolworths shares at 30x FY22’s estimated earnings and 26x FY23’s estimated earnings.

FY22 first quarter

We’ve heard what analysts think, but it’s a good idea to know about the actual numbers that Woolworths is reporting and what the company is saying.

In the 14 weeks to 3 October 2021, group sales were up 7.8% to $6.07 billion, whilst total e-commerce sales were up 53.5% to $1.88 billion.

There was quite a large difference in performance between the main divisions.

Australian food saw sales growth of 3.9% year on year. Australian ‘B2B’ (business to business) saw growth of 196.4%, which included the acquisition of PFD Food Services as well as the recognition of Endeavour Group (ASX: EDV) partnership revenue. New Zealand food, in Australian dollars, was up 12.9% and Big W sales were down 17.5%.

In October, Australian food sales had “slowed” as lockdown restrictions eased, but Big W sales had improved.

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

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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.

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