Coles Group Ltd (ASX: COL) shares could be destined to deliver big returns over the next 12 months.
That's the view of analysts at Macquarie Group Ltd (ASX: MQG), which see a lot of value in the supermarket giant's shares at current levels.
What is the broker saying about Coles?
In a note prior to the release of the ACCC Supermarkets Inquiry final report, the broker suggested that investors buy Coles shares.
This is based on historical trends of ASX shares outperforming once regulatory inquiries conclude. It explains:
Our analysis of share price performance around three major consumer-facing regulatory inquiries into the banks, QAN and childcare suggests the market tends to "sell the rumour" and "buy the fact". 100 days prior to the final reports being released, these groups on average delivered a -1% return. However, upon conclusion or release of the final report, there is a significant turnaround in performance. On average, these groups generated a +17% return following respective events.
Coles shares are up 2.5% since the release of the final report last week, which could mean there's still plenty more of gains ahead in next 100 days.
Coles shares tipped to deliver big returns
Macquarie certainly believes there could be market-beating returns on the way for investors. Its analysts have put an outperform rating and $22.00 price target on them.
Based on the current Coles share price of $18.95, this implies potential upside of 16% for investors over the next 12 months.
In addition, the broker is forecasting fully franked dividends per share of 71 cents over the next 12 months. This represents a 3.75% dividend yield and boosts the total potential return to just under 20%.
To put that into context, if Macquarie is on the money with its recommendation, a $10,000 investment in Coles shares would be worth around $12,000 by this time next year.
Commenting on its bullish view of the supermarket leader and its preference for Coles over rival Woolworths Group Ltd (ASX: WOW), the broker said:
We retain an Outperform rating and preference for COL, with margins continuing to benefit from supply-chain investments. As a result of its SSI programme and a wind-down of dual running costs, we expect FY26 to be a particularly strong year for the group, with earnings having been the key driver of recent performance.
All in all, the broker believes now could be an opportune time to pick up this blue chip and it is hard to argue against this.
