Price check: Why did the Woolworths share price push 5% higher in March?

Woolworths shares ended March in the green.

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Key points

  • Woolworths shares gained 5% in March
  • While the company didn't release any price-sensitive announcements, investor confidence led the share price charge
  • In its half year results, Woolworths noted that 2022 is experiencing increased Australian food sales

The Woolworths Group Ltd (ASX: WOW) share price continued its upward trajectory for the month of March.

Its shares made a stunning turnaround when compared to the earlier months of 2022, surging by 5% in March.

In contrast, January led Woolworths shares on a decline of almost 10%, with February registering a mediocre gain of 3%.

What’s going on with Woolworths lately?

While the company hasn’t released any market-sensitive announcements since its half year results, investors appear confident in the outlook.

Previously, the group stated that the financial performance for H1 FY22 was materially impacted by the COVID-19 pandemic.

And while the company experienced strong sales growth for continuing operations, this was offset by $239 million of COVID costs. This was due to the outbreak at Woolworths’ stores and distribution centres from late last year to early 2022.

Notably, Woolworths shelves have been laid bare in stores across the country as a result of the staff shortages. This resulted in about 50% of delayed deliveries for major product lines.

However, with COVID-19 levels subsiding, this means that the group’s pandemic costs could in turn fall.

In addition, supply issues are likely to be resolved, with product limits removed and supermarket shelves stacked back to full again.

Management noted in the results that the first 7 weeks of 2022 led Australian food sales to increase by 5%.

Furthermore, assuming a normal operating environment during Q3, the company is forecasting an improved financial performance in the second half.

Is this a buying opportunity?

Since reporting its financial scorecard results, a number of brokers have weighed in on the Woolworths share price.

The team at Citi raised its price target by 3.3% to $40.30 for the retail conglomerate’s shares. This implies a potential upside of around 7% from where it trades today.

On the other hand, Macquarie analysts slashed Woolworths shares by 4.5% to $38.20 apiece. It appears that the broker thinks that the company’s shares price is almost fully valued.

Woolworths share price snapshot

It’s been a rollercoaster ride for Woolworths shares over the last 12 months, posting a small gain of around 2.5%.

Woolworths has a price-to-earnings (P/E) ratio of 5.76 and commands a market capitalisation of roughly $45.82 billion.

Motley Fool contributor Aaron Teboneras 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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