Wesfarmers Ltd (ASX: WES) shares are back on form on Tuesday.
In afternoon trade, the conglomerate's shares are up over 1.5% to $45.10.
This has reduced the Wesfarmers share price year to date decline to approximately 25%.
Can Wesfarmers' shares keep rebounding?
The good news is that Morgans believes Wesfarmers shares have major upside potential over the next 12 months.
In fact, its analysts are so positive on the company, they have named its on their best ideas list again.
This list contains the ASX shares that the broker believes offer the highest risk-adjusted returns over a 12-month timeframe and are supported by a higher-than-average level of confidence. They are its most preferred sector exposures.
According to the note, Morgans has an add rating and $55.60 price target on its shares.
This implies a potential return of 23% for investors before dividends and approximately 27% including them.
What did the broker say?
Morgans believes recent share price weakness has created a buying opportunity for investors. Particularly given the quality of the company, its talented management team, and robust balance sheet. It commented:
WES possesses one of the highest quality retail portfolios in Australia with strong brands including Bunnings, Kmart and Officeworks. The company is run by a highly regarded management team and the balance sheet is healthy. While COVID-related staff shortages are proving to be a challenge, the core Bunnings division (>60% of group EBIT) remains a solid performer as consumers continue to invest in their homes. We see the pullback in the share price as a good entry point for longer term investors.
Morgans also previously said:
Trading on 22.5x [now 21x] FY23F PE and 3.8% [now 4%] yield, we continue to see WES's valuation as attractive for a high-quality business with a diversified group of retail and industrial brands, solid balance sheet and strong leadership team that will continue delivering long-term value for shareholders.
All in all, this could make Wesfarmers' shares worth considering if you're looking for some new additions this month.
