UBS believes the market is not fully appreciating near-term earnings upside and long-term earnings optionality at Woolworths. This is based on the broker’s calculation that the current shares price is trading at an unwarranted discount.
The analyst upgrades like-for-like sales, which is the key driver of EPS forecast increases.
UBS sees the company will exit covid-19 stronger, with higher share, richer data and an opportunity to expand share of customer wallets long term. This coupled with recent investments (for example Marley Spoon) accelerates the shift to ‘Supermarket 2’, with the potential for (incremental) alternative profit streams accounting for around 25% of Food earnings (EBIT).
The Buy rating is unchanged and the target price is increased to $44 from $43.50.
Sector: Food & Staples Retailing.
Target price is $44.00.Current Price is $39.20. Difference: $4.80 – (brackets indicate current price is over target). If WOW meets the UBS target it will return approximately 11% (excluding dividends, fees and charges – negative figures indicate an expected loss).
