The Coles Group Ltd (ASX: COL) share price is trading in the red at Thursday lunchtime. At the time of writing, the shares are 1.05% lower at $22.10 a piece. Over the month, the supermarket giant's shares have dropped 4.66%, but they're still 21.72% higher than this time last year.
The Coles share price enjoyed a 15.9% spike in late August off the back of a robust FY25 result. It also posted a strong quarterly update in late October, where it reported a 3.9% increase in group sales. But liquor sales were down 1.1% and new legislation pushed its tobacco sales 57% lower. The quarterly results were generally in line with analyst expectations.
The company also paid its investors two fully franked dividends, totalling 69 cents a share, to eligible stockholders over the year.
It appears that Coles is positioning itself as the stronger market player amid an ongoing supermarket rivalry with its competing giant, Woolworths Group Ltd (ASX: WOW).
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Can Coles keep growing?
Overall, Coles has been a strong performer this year, and it looks like its ongoing growth strategy has paid off. But the business will face headwinds from resilient inflation and cost-of-living pressures in Australia.
Consumers are being forced to cut back on discretionary items, and even Coles' executives have noted that shoppers are visiting more stores and being more selective. And this could be problematic for business growth.
What about Coles shares? Is there more upside ahead?
I'm concerned that its share price has reached a ceiling and has already started to correct from its peak.
TradingView data shows analyst sentiment about Coles shares is split. Out of 17 analysts, 10 have a buy or strong buy rating, 5 have a hold rating, and the remaining 2 have a strong sell rating.
The maximum target price for Coles shares is $ 26.60, which implies a potential 20.33% upside for investors at the time of writing. Although some analysts expect to see a 7.24% downside for the shares, to around $20.50 a piece.
Tony Locantro from Alto Capital has a sell recommendation on the stock. He said he sees headwinds building for Coles shares following their strong run.
Michael Gable from Fairmont Equities also recently said his team "can't identify sufficient catalysts to justify the share price". He added that persistent inflation and elevated interest rates could see a reversal in the Coles share price.
The team at Morgans have a hold rating and $22.90 price target on Coles shares. The broker thinks that investors should wait for a better entry point before buying the stock.
However, Morgan Stanley is more bullish. The broker has an overweight rating and $26.50 price target on its shares.
