It has been a great year for Coles Group Ltd (ASX: COL) stock.
Since the start of 2024, the supermarket giant's shares have risen over 11%.
This is more than double the return of the benchmark ASX 200 index, which is up just under 5% year to date.
Can the run continue? Should you buy, sell, or hold Coles stock in August? Let's find out.
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Should you buy, sell, or hold Coles stock?
The broker community is quite divided on Coles following its strong gain this year.
For example, the team at Goldman Sachs thinks that its shares are now fully valued. The broker has a neutral rating and $16.70 price target on them.
Goldman also believes that rival Woolworths Group Ltd (ASX: WOW) will deliver stronger growth than Coles in the coming years. It commented:
We expect COL to report lower comps sales and EBIT margin growth in FY25/26 vs key competitor WOW, though execution under new CEO has been increasingly positive. COL is trading below long term 12m forward P/E but with double running cost associated with Witron/Ocado facilities alongside existing infrastructure, we believe this is fair value. We are Neutral rated on COL.
Elsewhere, analysts at Ord Minnett think that Coles stock is overvalued at current levels. The broker has a lighten rating and lowly $15.00 price target on its shares.
The bulls
Two leading brokers that don't agree with the above are Bell Potter and Morgans. They both have the equivalent of buy ratings on the company's shares with price targets of $19.00 and $18.95, respectively.
Commenting on its bullish view, Morgans said:
In our view, the ongoing scrutiny on the supermarkets has affected short term sentiment in the sector, which we believe creates a good buying opportunity in COL. While Liquor sales remain soft, we expect the core Supermarkets division (~92% of earnings) to continue to be supported by further improvement in product availability, reduction in total loss, greater in-home consumption due to cost-of-living pressures, and population growth.
Bell Potter also believes that population growth will benefit Coles. It adds:
In the medium term, 1) higher immigration should support grocery spending, and 2) Coles is entering a period of elevated capex intensity as it reinvests to modernise its supply chain and to catch up to competitors on online and digital offerings, which should help Coles maintain its market position.
Food for thought for investors.
