Credit Suisse views Woolworths as a solid hold entering FY20 and prefers it over the Coles Group ((COL)) due to its cost and operating income guidance certainty for FY20.
The broker believes the improvement in Woolworths, with sales revenue up 28% in the fourth quarter to June 14, was under-appreciated by investors.
The retailer has a strong online presence, a factor that will be more important in the long-term, comments the broker.
Earnings forecasts have been reduced for the first half of FY21 due to ongoing social distancing restrictions in Victoria although on the whole, the broker feels the Woolworths’ hotel business is well placed to deal with the uncertainty.
Credit Suisse maintains its Neutral rating with a target price decreasing to $37.18 from $38.88.
Sector: Food & Staples Retailing.
Target price is $37.18.Current Price is $38.86. Difference: ($1.68) – (brackets indicate current price is over target). If WOW meets the Credit Suisse target it will return approximately -5% (excluding dividends, fees and charges – negative figures indicate an expected loss).
