Why it could be a good time to buy Woolworths shares

Goldman Sachs is feeling bullish about this retail giant.

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If you are looking for big returns in 2024, then Woolworths Group Ltd (ASX: WOW) shares could be just the ticket.

That's the view of analysts at Goldman Sachs, which are feeling very bullish about the retail giant.

Why now could be the time to buy Woolworths shares

Goldman thinks so highly of Woolworths that it has put the supermarket operator on its coveted conviction list. Only the very best investment opportunities make this list.

Its position on the list has been predicated on the broker's belief that it is well-positioned to deliver strong earnings growth in the coming years. This is thanks largely to market share gains and its omni-channel advantage. Goldman explains:

We forecast Woolworths will deliver FY23-26E 3-yr group NPAT CAGR of 8.2%, on the back of 1) robust supermarkets growth of ~4% in FY23-26E, 2) further market share gain due to early mover advantage in digitalization and omni-channel execution, and 3) loyalty/retail media further margin opportunities.

How high can its shares rise?

According to the note, the broker has retained its conviction buy rating and $42.40 price target on Woolworths' shares.

Based on the current Woolworths share price of $36.87, this implies a potential upside of 15% for investors over the next 12 months.

In addition, the broker is expecting the company to increase its dividend to a fully franked $1.12 per share in FY 2024. This represents an attractive 3% dividend yield, which boosts the total potential return on offer with its shares to 18%.

Overall, this could make Woolworths a good option for any investors who are looking for blue-chip additions to their portfolio next year.

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 positions in and has recommended Goldman Sachs Group. 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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