Wesfarmers Ltd (ASX: WES) shares have had a strong 2026, climbing 10% and comfortably beating the S&P/ASX 200 Index (ASX: XJO), which is up around 6% over the same period.
But with the shares trading near $89.45, some experts think investors should hit the sell button.
Wesfarmers shares were down a modest 0.7% in Monday afternoon trade, broadly tracking the market's 0.5% decline.
The issue isn't the business. It's the price.
Image source; Getty Images
Wesfarmers keeps finding new ways to grow
There's plenty to like about Wesfarmers shares. The company has opened five Anko stores in the Philippines and plans to add another five by the end of FY27.
Back home, Bunnings continues to expand into new categories, including pet products and automotive accessories. Kmart is also testing larger K Home stores as it looks to capture more of the furniture market.
Bunnings and Kmart remain exceptional retailers, combining strong brands, competitive pricing, and impressive returns on capital.
Wesfarmers is also developing potential growth engines through Priceline, OnePass, customer data, retail media, and its Mt Holland lithium project.
OnePass is particularly interesting because it could encourage customers to shop across multiple Wesfarmers businesses.
The company is also deploying artificial intelligence across merchandising, marketing, supply chains, and productivity.
So what's the problem?
The valuation is getting spicy
At the current share price, Wesfarmers trades at almost 33 times estimated FY27 earnings. That's a hefty valuation — and one that leaves little room for disappointment.
Morgan Stanley has a sell rating and a $79 price target. The broker warned that the rally in consumer discretionary stocks has "run ahead of fundamentals and is unlikely to prove durable".
Alto Capital's Tony Locantro also has a sell rating, arguing that much of Wesfarmers' quality and long-term growth prospects are already reflected in the share price.
What do other analysts think?
TradingView data paints an even gloomier picture.
Of 15 analysts, nine rate Wesfarmers shares a strong sell, five say hold, and just one recommends buying.
The average price target is $77.35, implying around 13% downside. The most bearish forecast sees the shares falling 27% to $65.10.
The dividend could soften the blow
Wesfarmers will report its FY26 results on 27 August, with investors watching its financial metrics and final dividend.
The company has already paid a fully-franked interim dividend of $1.02 per share, while consensus expects a final dividend of around $2.20.
Analysts forecast FY27 dividends could reach $2.33 per share, up 7.9%. That's a prospective yield of roughly 2.6% at the current price.
It's hardly a monster yield, but the growing dividend could still appeal to income-focused investors.
Foolish Takeaway
Wesfarmers remains an outstanding collection of businesses. The question is whether $89.45 is an outstanding price to pay for them.
With the shares trading at a lofty earnings multiple and most analysts expecting downside, investors may want to consider whether the company's excellent growth prospects are already baked into the price.
The upcoming FY26 result could provide the next major test.
