The Woolworths Group Ltd (ASX: WOW) share price has risen by around 16% over the last two months. That compares to a return of approximately 7% for the S&P/ASX 200 Index (ASX: XJO). So, Woolworths has achieved more than double the returns of the index.
But, after a solid run over this relatively short period of time, could Woolworths shares still be an opportunity?
Image source: Getty Images
Acquisitions
In the last few months, the company has been busy making some deals.
One of the deals is the planned purchase of 80% of Mydeal.Com Au Ltd (ASX: MYD) for $1.05 per share. This represented a 62.8% premium to the closing price of MyDeal on the ASX of 65 cents on 19 May 2022.
Woolworths was attracted to this leading online marketplace business because of its marketplace capabilities, particularly in furniture, homewares and other bulky goods. It will "complement Big W's existing general merchandise offering".
At the time of the acquisition, MyDeal had 1,900 sellers with more than six million products.
In July, the company announced that it was buying Shopper Media Group for $150 million. This business was described as a leading Australian digital out-of-home media company, offering targeted shopping advertising through a national screen network of more than 2,000 screens in over 400 shopping centres.
Woolworths liked the idea of owning Shopper Media Group because of the ability to bring it together with Cartology, which is Woolworths' retail media business. It wants Cartology to become the trusted media partner of choice for brands and retailers. This will allow it to provide clients with "more opportunities to reach their customers via seamless targeted advertising solutions."
Trading update
In terms of a trading update, the latest investors have heard was the FY22 third quarter update. It said that group continuing operations sales were up 9.7% to $15.1 billion, with the Australian food division generating 5.4% growth to $11.4 billion.
A sizeable part of the increase was due to the Australian business to business (B2B) sales jumping 217% to $995 million, largely driven by PFD and Endeavour Group Ltd's (ASX: EDV) partnership revenue not being included in the prior year.
Woolworths revealed that trading momentum in the FY22 fourth quarter had continued in Australian food and Big W, with "strong" Easter seasonal trade.
Is the Woolworths share price a buy?
One of the latest ratings comes from Citi, which rates Woolworths as a buy, with a price target of $42.50. That suggests a possible rise of more than 10%. It thinks it can benefit from inflation.
At the opposite end of the opinion spectrum is Credit Suisse, with an underperform rating. The price target is $33.89, implying a possible drop of around 10%. Credit Sussie wasn't a fan of the MyDeal acquisition.
The broker Macquarie is neutral on the business, with a price target of $36.40, implying a mid-single-digit drop. There are a few different factors for the broker to think about in the upcoming result, such as rising wages and food inflation. It could be tough to deliver growth in the first half of FY23 because the first half of FY22 included lockdowns.
