The Wesfarmers Ltd (ASX: WES) share price could be great value at the current level.
That's the view of one of Australia's leading brokers.
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Why is the Wesfarmers share price great value?
A recent note out of Morgans reveals that its analysts have retained their add rating with a $58.40 price target.
Based on the current Wesfarmers share price, this implies potential upside of 40% for investors over the next 12 months.
Its analysts are fans of Wesfarmers due to their belief that it "possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Officeworks."
The broker also highlights that "the company is run by a highly regarded management team and the balance sheet is healthy."
What else is the broker saying?
In addition, Morgans believes that Wesfarmers is well-positioned for a tough retail environment. This is due to partly to its focus on value with its popular Kmart business. It explained:
Kmart's scale and sourcing capabilities underpin its low-cost business model, which allows it to deliver the lowest prices, driving greater demand and scale, and allows further sourcing and product development capabilities.
With value expected to become increasingly important, we think Kmart is well-placed to benefit with the average price of an item at around $6-7. Even if price rises are needed to mitigate cost inflation, this will be small on an absolute basis (eg, a 5% increase in average selling price = ~35c) and Kmart can use its scale and supply chain flexibility to limit increases vs its competitors.
All in all, the broker sees the company "as a long-term, core portfolio holding" and appears to believe the recent weakness in the Wesfarmers share price is a buying opportunity for investors.
