Now could be the time to buy Woolworths Group Ltd (ASX: WOW) shares.
That's the view of analysts at Bell Potter, which believe that the worst is now behind the supermarket giant.
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What is the broker saying?
Bell Potter was relatively pleased with the company's performance in the first quarter of FY 2026. However, it is the encouraging start to the second quarter which has caught the eyes of its analysts. The broker said:
Woolworths reported +2.5% YOY growth in 1Q26 sales to $18,483m (vs. BPe of $18,448m), driven primarily by Australian B2B growth. Key points: Australian Food: Australian Food revenues grew +2.1% YOY to $13,887m (vs. BPe of $13,912m and VA of $13,987m). 1Q26 YOY growth of +2.1% (+3.8% YOY extobacco) has improved to +3.2% YOY in early 2Q25 trading (+5.0% YOY ex-tobacco). These numbers compared to the opening 8-week trading update of +2.1% YOY (+4.0% YOY ex-tobacco), implying the business is demonstrating the early signs of halting the deterioration seen in 4Q25-1Q26.
Woolworths shares upgraded
In light of its improving performance and the discount that Woolworths shares trade on compared to Coles Group Ltd (ASX: COL) and historical multiples, Bell Potter thinks now is the time to invest.
According to the note, the broker has upgraded Woolworths shares to a buy rating (from hold) with an improved price target of $30.70 (from $29.80).
Based on its current share price of $27.61, this implies potential upside of 11% for investors over the next 12 months.
This would turn a $10,000 investment into $11,100 by this time next year if Bell Potter is on the money with its recommendation.
But the returns won't stop there. Woolworths is a keen dividend payer and this is expected to continue with a fully franked 91 cents per share dividend in FY 2026. This would mean a 3.3% dividend yield or a return of $330 on a $10,000 investment.
Commenting on its upgrade, the broker said:
We upgrade from Hold to Buy. WOW has been in an earnings downgrade cycle for two years and this looks to be coming to an end. Trading at a reasonable ~12% discount to COL and ~14% discount to its historical FWD EV/EBITDA, there is now a reasonable valuation arbitrage, just as the underperformance in Australian Food looks to be bottoming and out-of-home indicators improving (the latter a positive for B2B).
