Are Woolworths shares a buy or a sell at under $33?

Should investors be 'buying the dip' with this one?

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It's been an unusually grim few months for the owners of Woolworths Group Ltd (ASX: WOW) shares. Woolworths investors might have gotten used to steadily rising share prices, as well as dividends in recent years.

After all, this is a company that gained around 10% in share price value over the COVID-ravaged years of 2020 and 2021, delivering a rising dividend to boot.

However, the last 12 months have seen some of these gains reversed. It was only in June last year that the Woolworths share price was sitting at over $40. Today, it is down to just $32.92 at the time of writing.

This means that Woolies owners have seen their investment shed 17.8% since June last year. The grocer is also down by close to 12% over 2024 to date.

Investors are often told that we should 'buy low' and 'sell high'. We're also regularly preached to 'buy the dip'. So does this mean we should all be flocking in and purchasing Woolworths shares right now? Let's discuss whether this ASX 200 blue-chip stock is a buy or a sell today.

Lacklustre earnings dent this ASX 200 blue chip

Firstly, it's worth pointing out why Woolies shares have been in such a funk lately. Investors seemed to lose a lot of confidence in this stock following the release of Woolworths' latest earnings report back in February.

As we covered at the time, these earnings showed sluggish food sales growth of 1.5% over the six months to 31 December. That was in stark contrast to its arch-rival Coles Group Ltd (ASX: COL), which reported a 3.7% rise in sales over the same period. This may have implied some loss of market share for Woolworths.

The best piece of news was perhaps the revelation that Woolworths' interim dividend for 2024 would come in at 47 cents per share, fully franked. That was an increase of one cent over last year's interim payout of 46 cents per share.

But even so, investors were not impressed. On the day these results came out, Woolworths shares plunged more than 7%, likely unassisted by the abrupt departure of CEO Bradford Banducci, which was announced concurrently.

Even today, the Woolworths share price remains down more than 8% from where it was before the earnings were released.

But has this presented investors with a buying opportunity?

Are Woolworths shares a buy or a sell at under $33?

Well, one ASX expert thinks so. As reported by The Bull, Christopher Watt, of Bell Potter Securities, has recently given the supermarket operator a buy rating.

Watt noted he expects the recent share price weakness to be shortlived, with the shares poised to stage a recovery. Here's what he said in full:

Shares in the supermarket giant have fallen from $37.51 on January 2 to trade at $33.25 on March 28. Sales moderated in the first seven weeks of the second half of fiscal year 2024 in response to lower inflation and a more cautious consumer…

We believe the weaker share price provides a buying opportunity as we expect Woolworths shares to recover.

However, not all experts possess such a positive outlook. Also speaking to The Bull on Woolworths was Damien Nguyen from ASX broker Morgans.

Nguyen took a very divergent path after looking at Woolworths shares, labelling the company a 'sell' and seeing "limited potential upside" over the short to medium term.

Here's what he had to say:

We see limited upside potential in the supermarket giant's share price during the next 12 months. WOW's first half result in fiscal year 2024 was in line with expectations. But commentary on sales for the first seven weeks in the second half of fiscal year 2024 was softer than anticipated. Investors may want to consider cashing in some gains.

So there you have it, two contrasting views on where Woolies is heading next. No doubt some Woolworths investors will take comfort from the former views. But we'll have to wait and see which of these ASX brokers proves to be on the money – only one will be right.

In the meantime, the current Woolworths share price gives this company a market capitalisation of around $40.52 billion, with a trailing dividend yield of 3.2%.

Motley Fool contributor Sebastian Bowen 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 positions in and has recommended Coles Group. 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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