This supermarket giant’s shares could be in the buy zone…
The post Top broker says Coles (ASX:COL) share price is a buy appeared first on The Motley Fool Australia. –
Since the start of the year, the supermarket giant’s shares have fallen 6.4%.
This compares to a gain of 10.25% by the S&P/ASX 200 Index (ASX: XJO) over the same period.
Is the Coles share price good value?
One leading broker that believes the underperformance in the Coles shares price is a buying opportunity is Morgans.
According to a recent note, the broker has retained its add rating and $19.80 price target on the company’s shares.
Based on the latest Coles share price of $17.32, this implies potential upside of 14% over the next 12 months.
And with Morgans forecasting a fully franked dividend of 61 cents per share in FY 2022, this potential return stretches to almost 18% including dividends.
Why is the broker positive on Coles?
Morgans believes that Coles is well-placed to benefit from people working from home and eating more at home due to COVID-19.
It also thinks the Coles share price is trading at a very attractive level at present. This is particularly the case in comparison to its rival Woolworths Group Ltd (ASX: WOW).
And finally, the broker likes Coles due to the attractive dividend yield that its shares offer.
Morgans explained: “While vaccines are being rolled out across Australia, we think people will continue to spend more time at home due to the ongoing risk of COVID flare-ups with the working-from-home trend also likely to stay for some time (eg, Sydney and Melbourne remain in lockdown indefinitely). This will be beneficial for the major supermarket operators. We continue to see COL (~24x FY22F PE and ~3.5% yield) as offering better value than WOW (32x FY22F PE and 2.5% yield).”
Should you invest $1,000 in Coles right now?
Before you consider Coles, you’ll want to hear this.
Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Coles wasn’t one of them.
The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.
*Returns as of August 16th 2021
Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.