Woolworths Group Ltd (ASX: WOW) shares could be a strong buy according to one leading broker.
In fact, the broker is so positive on the retail giant that it has its shares on its coveted conviction list.
Who is bullish on the Woolworths share price?
The broker that is positive on Woolworths shares is Goldman Sachs, with a recent note revealing that its analysts have a buy rating and $42.80 price target on them.
Based on the current Woolworths share price of $38.55, this suggests that its shares could rise 11% from current levels.
Furthermore, the broker is forecasting a fully franked dividend yields of 2.7% in FY 2023 and 3% in FY 2024.
Why is Goldman tipping it as a buy?
Goldman is very positive on the Woolworths' outlook and is expecting the company to deliver solid revenue and earnings growth in the coming years.
Its analysts highlight that their "updated forecasts imply FY22-25e ~3.4% sales CAGR and ~9.6% CAGR for EBIT/NPAT respectively." The latter is particularly impressive for such a large, defensive company like Woolworths.
But where is this growth coming from? The broker believes the company's loyalty program and omni-channel advantage will be the keys to its success. In addition, its ability to pass through cost inflation to customers is a big positive in the current environment. It explains:
We are Buy rated (on Conviction List) on the stock as we believe the business has among the highest consumer stickiness and loyalty among peers, and hence has strong ability to drive market share gains via its omni-channel advantage, as well as pass through any cost inflation to protect its margins, beyond market expectations. The stock is trading below its historical average (since 2018), and we see this as a value entry level for a high-quality and defensive stock. Catalysts include 1H23 results with better-than-expected mix improvement to drive positive price and margins and a consistent demonstration of market share gains in FY23/24 that could lead to re-rating of the business vs COL/MTS.
