Why the Woolworths share price could rise a further 11% this year

Woolworths shares are smashing the market this year and the run may not be over.

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The Woolworths Group Ltd (ASX: WOW) share price is smashing the market in 2023.

Since the start of the year, the retail giant's shares are up 15% to $38.60.

This compares favourably to the performance of the ASX 200 index, which is up a modest 3% year to date.

A man sees some good news on his phone and gives a little cheer.

Image source: Getty Images

Can the Woolworths share price keep rising?

The good news is that one leading broker believes the Woolworths share price still has room to climb from current levels.

According to a recent note out of Goldman Sachs, its analysts have the company on the broker's coveted conviction list with a buy rating and $42.80 price target. This implies potential upside of 11% for investors over the next 12 months.

In addition, the broker is forecasting fully franked dividend yields of approximately 3% this year and next.

Why is Goldman so bullish?

Goldman believes that Woolworths is well-positioned to grow its market share further. This is thanks to its omni-channel advantage and very strong loyalty program. It explains:

WOW is the largest supermarket chain in Australia with an additional presence in NZ, as well as selling general merchandise retail via Big W. 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.

In light of this, the broker feels that the Woolworths share price is trading at a great entry level for investors. It said:

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.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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