The Woolworths Group Ltd (ASX: WOW) share price has struggled in recent months, falling 14% from its August peak.
The stock reached a near-four-month high of $39.61 shortly before the supermarket giant released its financial year 2022 earnings. Today, the Woolworths share price is trading at $33.92, having slipped 1.08% this morning.
For comparison, the S&P/ASX 200 Index (ASX: XJO) is up 0.15% at the time of writing. Meanwhile, the company's home sector – the S&P/ASX 200 Consumer Staples Index (ASX: XSJ) – has slipped 1.25%.
Could the stock's recent tumble present a buying opportunity? Ord Minnett senior client advisor Tony Paterno doesn't think so.
Let's take a closer look at why the expert is bearish on the ASX 200 supermarket favourite.
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Could this weigh on the Woolworths share price?
The future looks cloudy for the Woolworths share price as one top broker tips the stock as a sell.
Paterno noted Ord Minnett continues to see "downside risks" to the supermarket operator's future earnings and multiples, as per The Bull. The expert continued:
We have reduced our earnings per share forecasts between 3% and 4%, primarily due to challenges in the New Zealand business.
The company's New Zealand food segment reported an 8.1% drop in sales over the first quarter of financial year 2023 compared to the same period of the prior year, bringing in just $1.8 billion.
Much of that was due to the cycling of a major COVID-19 lockdown in Auckland in the prior period. However, CEO Brad Banducci noted numerous other impacts, saying:
In New Zealand Food, we are seeing signs of stabilisation in the trading environment; however, given the combination of lower sales and materially higher wage inflation, we currently expect [first half earnings before interest and tax] of NZ$100 — $130 million.
For comparison, the segment brought in NZ$200 million in the first half of last financial year. The company expects the upcoming second half to be a better one.
Meanwhile, not all brokers are bearish.
Goldman Sachs believes Woolworths shares are a buy, slapping the stock with a $41.70 price target – representing a potential 23% upside. It recently said:
Despite a noisy and softer [first quarter], we remain confident that [Woolworths] is the superior operator within [Australian] supermarkets.
