Metcash share price hits 52-week high on broker upgrade: Time to buy?

Brokers have responded positively to its trading update.

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Man drawing an upward line on a bar graph symbolising a rising share price.

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The Metcash Ltd (ASX: MTS) share price is climbing again on Wednesday.

In morning trade, the wholesale distributor's shares are up 2% to a 52-week high of $4.06.

Why is the Metcash share price rising again?

Investors have been buying the company's shares today after brokers responded positively to its trading update.

In case you missed it, on Tuesday Metcash revealed that total group sales for the ten months to 25 February increased 0.9% compared to the prior corresponding period.

This reflects a 1.6% increase in Liquor sales, a 2.4% lift in Hardware sales, and flat Food (including tobacco) sales. If you exclude tobacco, food sales were up by a solid 5% for the 10 months.

One broker that was particularly pleased with the update was Macquarie.

According to a note out of the investment bank this morning, its analysts have upgraded the company's shares to an outperform rating with a $4.30.

Based on the current Metcash share price, this implies potential upside of 6% for investors from current levels.

Macquarie is also expecting a 21 cents per share dividend in FY 2024. This equates to a 5.2% dividend yield, which boosts the total potential return to approximately 11%.

Elsewhere, the team at UBS has retained its buy rating with an improved price target of $4.25, and Jefferies has reaffirmed its buy rating with a higher price target of $4.30.

What else is being said?

One broker that isn't feeling as bullish is Goldman Sachs. This morning it held firm with its neutral rating with an improved price target of $3.70.

Its analysts remain neutral given "intense competition in both Food and Hardware" and "higher interest expense" concerns. The broker also notes there are execution risks "as the business navigates significant organic and inorganic change."

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 and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool Australia has recommended Metcash. 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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