The Coles Group Ltd (ASX: COL) share price was out of form on Thursday.
The supermarket operator's shares ended the day 0.5% lower at $17.72.
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Where next for the Coles share price?
According to a recent note out of Citi, its analysts believe the Coles share price is heading higher from here.
Its analysts currently have a buy rating and $19.30 price target on the supermarket giant's shares. Based on the current Coles share price, this implies potential upside of 9% for investors.
But it gets better. Citi is expecting Coles to pay fully franked dividends per share of 63 cents in FY 2022 and 72 cents in FY 2023. These equate to yields of 3.6% and 4.1%, respectively.
What did the broker say?
Citi was pleased with Coles performance during the third-quarter and notes that there has yet to be any sign of customers trading down or buying less because of inflation.
In light of this, it feels the risk will be to the upside for estimates if this trend continues.
Citi explained:
Coles provided its 3Q22 trading update with sales in line with our expectations. There were no observable signs of trading down or lower volumes in response to higher food inflation. We see upside risk to our forecasts if the volume response is muted.
A normalisation of availability, local shopping trends and online penetration should benefit Coles from both a sales and margin perspective. We cut our earnings forecast by ~3% in FY22e to account for costs related to COVID and the floods but make no changes to future periods. We remain Buy rated with a $19.30 target price.
