The Wesfarmers Ltd (ASX: WES) share price has underperformed this year, falling victim to rising inflation and interest rates.
Investors last heard from the S&P/ASX 200 Index (ASX: XJO) conglomerate when it handed in its full-year results during the August reporting season.
Soon, investors will be putting Wesfarmers shares back under the microscope when the company holds its annual general meeting (AGM) on 27 October.
This will be the conglomerate's 41st AGM and will take place at the Perth Convention and Exhibition Centre. Shareholders will be able to tune in and participate either in person or online.
Of particular note will be Rob Scott's managing director's address, which will likely include commentary on recent trading conditions.
As we head into AGM season, let's take a closer look at what leading brokers think about the Wesfarmers share price.
Is it time to pounce on Wesfarmers shares?
It's a mixed bag from brokers, with some camped on the bullish side of the fence while others take a more bearish stance.
Fighting for the bulls is Morgans, which currently has an add rating and a $55.60 price target on Wesfarmers shares. With shares last closing at $44.11 on Thursday, this implies potential upside of 26% over the next 12 months.
Morgans views the recent pullback in the Wesfarmers share price as a good entry point for longer-term investors. It believes Wesfarmers has one of the highest-quality retail portfolios in Australia, along with a highly regarded management team and healthy balance sheet.
UBS is also a fan of Wesfarmers. In the wake of the ASX 200 conglomerate's FY22 results, the broker retained its buy rating on Wesfarmers shares but slightly trimmed its price target to $55. This implies 25% upside over the next 12 months.
UBS was pleasantly surprised by Wesfarmers' retail performance to start FY23, also noting:
Rising cost of living is not a headwind at present, rather a driver of market share gains given the strong value propositions in the WES Retail divisions.
Not so fast…
On the flip side, Goldman Sachs isn't so positive. The broker currently has a sell rating and a 12-month price target of $38.70 on Wesfarmers shares, implying potential downside of 12%.
Goldman believes growth headwinds lie ahead amidst higher investments in areas such as digital, consumer data, and health, which could take years to bear fruit. Ultimately, the broker doesn't believe that the current valuation multiples are justified by Wesfarmers' growth profile.
After digesting Wesfarmers' FY22 results, analysts at Citi also retained their sell rating on Wesfarmers shares with a price target of $40. This implies potential downside of 9% over the next 12 months.
While Citi recognises that Wesfarmers is a high-quality, diversified business, it sees better value elsewhere. With a relatively optimistic view of the consumer, analysts at Citi prefer discretionary retailers that are trading at large discounts to their historical forward multiples, such as JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN).
Wesfarmers share price snapshot
Being exposed to consumer spending and, in turn, vulnerable to the impacts of soaring inflation and rising interest rates, Wesfarmers shares have found it tough going in 2022.
The Wesfarmers share price has tumbled 26% in the year to date, underperforming the ASX 200, which has suffered a more muted 11% fall.
After reporting full-year net profit after tax (NPAT) of $2.4 billion, Wesfarmers shares are currently trading on a trailing price-to-earnings (P/E) ratio of 21x.
In terms of dividends, the ASX 200 conglomerate doled out $1.80 in annual payments this year, fully franked. This puts Wesfarmers shares on a trailing dividend yield of 4.1%, which grosses up to 5.8% with the benefit of franking credits.
