Are Woolworths shares a no-brainer buy?

Analysts see huge value in this retail giant's shares at current levels.

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Every so often, the share market throws up some amazing investment opportunities.

Could Woolworths Group Ltd (ASX: WOW) shares be one of these right now?

With its shares down 21% from their highs, let's see what analysts are saying about the supermarket giant.

Are Woolworths shares a no-brainer buy?

The team at Goldman Sachs thinks that investors should be fighting to get hold of Woolworths shares while they are down in the dumps.

A recent note out of the investment bank reveals that the broker has a conviction buy rating and $39.40 price target on the retailer's shares.

Based on the current Woolworths share price of $31.99, this implies potential upside of 23% for investors over the next 12 months.

Let's put that into context. If you were to invest $10,000 into the company's shares, this would turn into $12,300 if Goldman Sachs' is on the money with its recommendation and valuation.

But the returns won't stop there. Your $10,000 investment would also generate income from dividends.

Goldman is forecasting fully franked dividends of $1.08 per share in FY 2024, $1.14 per share in FY 2025, and then $1.23 per share in FY 2026. This represents dividend yields of 3.4%, 3.55%, and 3.85%, respectively.

And in respect to dividend income, this would yield approximately $340, $355, and $385 of dividends for those financial years.

Why Woolies?

Goldman believes that recent weakness means that Woolworths shares are trading at an attractive level for a value entry point. Particularly given the company's quality and its defensive earnings.

In addition, the broker is positive about Woolworths' growth outlook due largely to its customer loyalty. It believes this is among the stickiest that you will find in Australia, which bodes well for the future. Goldman summarises:

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 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 its ability to 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.

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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