The Woolworths Group Ltd (ASX: WOW) share price has seen volatility since the start of 2022. But what is the outlook for April?
It’s hard to know what a share price is going to do on any given day, week, or month. But analysts often give their opinion on what they think of a company’s current valuation.
Woolworths shares are now down 3% in 2022, but does this mean that the supermarket business looks good value?
Analyst opinions on the Woolworths share price
Brokers are mixed on the business.
On the optimistic side is Citi, which rates the supermarket company as a buy, with a price target of $40.30. The broker thinks that the recently-announced federal budget will help Woolworths because it means that Aussies will be able to more easily afford to pay for products that have risen in price.
Ord Minnett also rates Woolworths as a buy, with a price target of $39.50. It thinks that Woolworths can grow sales quicker than the competition.
Speaking to Livewire, the fund manager Raaz Bhuyan from WaveStone Capital also called Woolworths a buy, citing food inflation and its digital offering as reasons to be positive about the business.
However, there are also analysts out there that aren’t optimistic either. UBS rates the company as a sell with a price target of just $34. After seeing the FY22 half-year result, UBS thought that the Woolworths share price was too expensive when compared to Coles Group Ltd (ASX: COL) and also because investor expectations are too high for the business.
How strong was the half-year result?
Woolworths reported that in the first six months of FY22, its continuing operations sales increased by 8% to $31.9 billion.
However, before significant items, the continuing operations half-year earnings before interest and tax (EBIT) fell 11% to $1.38 billion, while net profit after tax (NPAT) fell by 6.5% to $795 million.
The company highlighted its e-commerce sales growth as one of the drivers of total sales growth. Total e-commerce sales increased by 48% to $3.49 billion.
Profitability was hurt by higher operating costs caused by COVID-19 and a delay in implementing productivity initiatives.
Investors can consider growth plans when thinking about the Woolworths share price.
Woolworths said that in the first seven weeks of 2022, Australian food total sales increased by around 5%, driven by the impact of the Omicron variant of COVID-19.
The company has a medium-term annual target of 10 to 25 new full range supermarkets, between five to 15 new Metro Food stores and three to four new Countdown supermarkets in New Zealand.
Woolworths expects inflation to continue to intensify because of industry-wide cost increases, though it said it would work hard to ensure “great value and affordable alternatives”.
Woolworths share price valuation
One of the latest opinions came from Citi. Using the broker’s numbers, the Woolworths share price is valued at 30x FY22’s estimated earnings.