Top broker tips Coles (ASX:COL) share price to climb 30% higher

The Coles Group Ltd (ASX:COL) share price could be going 30% higher from here according to one leading broker. Here’s why…
The post Top broker tips Coles (ASX:COL) share price to climb 30% higher appeared first on The Motley Fool Australia. –

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company

In morning trade the Coles Group Ltd (ASX: COL) share price is pushing higher.

At the time of writing, the supermarket giant’s shares are up 2% to $15.80.

This means the Coles share price has now limited its year-to-date decline to just under 15%.

Is the Coles share price in the buy zone?

According to a note out of Goldman Sachs, its analysts believe the recent weakness in the Coles share price is a buying opportunity for investors.

This morning the broker reaffirmed its buy rating and $20.70 price target on the company’s shares.

Based on the current Coles share price, this price target implies potential upside of 31% over the next 12 months. And if you include dividends, this stretches to approximately 35%.

What did Goldman say about Coles?

There are a few reasons that Goldman Sachs is positive on the company. One of those is its smarter selling program. It commented:

“The smarter selling cost out program continues to be in important medium-term support to earnings with another A$250mn in gross cost out forecast by management in FY21. Although there is some concern in the market around the lower sales trends at COL leading to a potential price war, we see the cost out as a key differentiator in margin performance ahead of some longer-term efficiency programs.”

And while Coles is underperforming rival Woolworths Group Ltd (ASX: WOW), Goldman appears optimistic that this gap will narrow in FY 2022.

“COL has underperformed WOW from a comparable store sales perspective by ~1.8% over the last three quarters. After adjusting for the divergent start in 3Q20 and store rollout, this growth differential persisted into 3Q21. WOW’s superior execution and stronger online focus is delivering consistent above market sales performance, however we expect this relativity to converge over FY22 as smarter selling initiatives deliver improvements in execution.”

Looking long term, the broker believes that Coles is well-placed to benefit from the automation of its supply chain.

“The key long-term theme for COL is the step change in efficiency the company will derive as it automates its supply chain with the Witron installations starting in SEQ and NSW. While this program will not begin to impact performance until FY24, management appear to be getting more confident about the benefits to longer-term competitiveness.”

Overall, with its shares trading at 20x estimated FY 2021 earnings, it sees a lot of value in them at the current level.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Top broker tips Coles (ASX:COL) share price to climb 30% higher appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!