ASX stock Woolworths Group Ltd (ASX: WOW) has seen its share price slide a hefty 20% this year, hitting lows not seen since before the COVID-19 pandemic.
Woolworths shares are currently trading at $29.54 apiece, down more than 10% in the past month alone.
But unlike the earth's Big Bang theory, this hasn't been a random event. The supermarket giant has been tied up in the headlines for some weeks now.
So, does this ASX stock present a buying opportunity after its recent sell-off? Let's see what the experts think.
Woolworths shares slide
The ASX stock has been volatile all year, more recently sliding from highs above $33 apiece in late October. Alongside inflationary pressures, a few key factors have pushed down the Woolworths' share price.
First, the company's half-year earnings report back in February disappointed investors. A $1.5 billion writedown in its New Zealand business led to a half-year net loss of $781 million.
Meanwhile, long-standing CEO Bradford Banducci's unexpected resignation added to market jitters. As a result, Woolworths shares fell sharply.
Adding to the company's woes, Woolworths has lost some ground to rival Coles Group Ltd (ASX: COL) throughout 2024.
In addition, Woolworths' net promoter score (NPS), which measures customer satisfaction relative to prices paid, declined in its last quarterly update. Whereas Coles and rival Aldi Stores both grew, according to The Australian Financial Review.
While Woolworths' sales grew this year, they've lagged behind Coles. In the first half of 2024, revenues grew 4.6% versus just 4% for Coles.
In the second half, Coles increased sales by 2.6% versus 1.2% for the ASX stock.
Woolworths' new CEO, Amanda Bardwell, acknowledged the pressure to cater to budget-conscious shoppers in Woolworths' latest quarterly results.
Bardwell noted that more customers were turning to discounts and lower-cost products, impacting the company's profit margins.
She added that Woolworths' half-year earnings were expected to be between $1.48 billion and $1.53 billion, down from $1.6 billion last year.
Stock prices, more often than not, reflect the path of underlying earnings of the businesses they represent. Earnings growth typically spurs share price growth, with the market adjusting prices to accurately reflect valuations.
What's more, markets are forward-looking, meaning that an expectation for lower earnings can negatively impact share prices. Such is the case with Woolies. Investors have tempered their expectations for the ASX stock, resulting in lower prices carried forward.
Brokers are mixed
With all the information above, one might expect to see the broker crowd equally pessimistic. But intelligent investors know that, whether it's socks or stocks, it's good to buy quality products when they're on sale.
But not all are optimistic about this ASX stock. According to CommSec, Woolworths is rated a hold, with eleven brokers rating it in this fashion. Three say to buy, and two say to sell.
Consensus also eyes earnings of $1.42 per share in FY25, marginally above last year's result. It also sees a 10% decline in dividends over the next two years.
Meanwhile, if you ask the experts at Goldman Sachs, Woolworths has some headwinds but also many promising opportunities.
The broker highlighted that Woolworths was well-positioned to strengthen its market share due to its extensive store network, strong online presence, and advanced data analytics.
While Goldman Sachs trimmed its price target on the ASX stock to $36.20, it retained its buy rating, suggesting a potential upside of around 22% from the current price.
UBS analysts also rate the stock a buy with a $31.25 price target. According to my colleague Tristan, however, it also projects a large cut in the ASX stock's dividend payout.
ASX stock takeaway
With Woolworths shares heavily in the red this year, brokers are mixed. Some say this ASX stock offers potential upside, especially for investors looking at long-term value in the consumer staples sector.
Others aren't convinced and are waiting it out on the sidelines.
In the last 12 months, the Woolworths share price is down more than 16%.
