Many S&P/ASX 200 Index (ASX: XJO) shares have been struggling in 2022 so far. The ASX 200 Index is itself still down around 2.3% year to date thus far, despite the recent run of pleasing performance we have seen. And the Woolworths Group Ltd (ASX: WOW) share price hasn't done much better.
Woolworths shares are today going for $36.24 at the time of writing. That puts the grocery giant at a 2022 loss of 5.8%, significantly under the index.
So why this disappointing performance from Woolworths shares?
Well, it's not entirely clear. The last major announcement out of the company was the half-year earnings results last month. This was something of a mixed bag. Although Woolies reported 8% revenue growth, it also revealed that earnings and net profits were both down. Investors were also asked to weather a 26.4% cut to the company's interim dividend.
Investors didn't seem too phased at the time, judging by the movements, or lack thereof, in the Woolworths share price at the time. But equally, they didn't seem inspired either.
But we also have some headwinds that the company continues to face in 2022. As confirmed in the earnings report, Woolworths' costs are rising. And not least fuel. The higher fuel prices we have seen in recent weeks will be hurting Woolworths. Distribution centres need to be filled and stores need to be stocked. This is usually done via road transport, which of course is a fuel-intensive exercise at the best of times, but would have only gotten more expensive in recent weeks. So perhaps this has been weighing in investors' minds too.
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Is the Woolworths share price a buy right now?
Of course, Woolworths is not alone in facing these pressures, so the company always has the option to raise prices to compensate. But one could still argue Woolworths shares are facing a few obstacles to higher profitability at the moment.
However, one expert ASX investor reckons the Woolworths share price is still cheap at today's levels. As we covered earlier this month, broker Citi liked what it saw in Woolies' half-year earnings, and maintained a buy rating on the shares. The broker has a 12-month share price target of $40.30, which implies a potential future upside of just over 11% on current pricing.
Citi sees Woolies benefitting from easing COVID restrictions and margin benefits as customers return to stores. It also expects that the grocer will be able to benefit from food inflation, noting shelf price increases of 2-3% in the second half of FY2022 alone.
So at least one ASX broker reckons Woolworths shares are a buy right now. No doubt shareholders will be hoping that the 11% upside Citi sees in the company turns out to be accurate. But, as always, we shall have to wait and see.
At the current Woolworths share price, this ASX 200 blue-chip has a market capitalisation of $43.74 billion, with a dividend yield of 2.59%.
