After Panic Buying Rally, What’s Next for Woolworths Share Price?

At time of writing, the share price of Woolworths Group Ltd [ASX:WOW] is up marginally, or .08%, trading at $37.90.

It’s been a topsy-turvy ride for the WOW share price as you can see below:

ASX Woolworths Share Price Chart - ASX WOW

Source: Tradingview.com

Woolies released its first quarter sales results on 4 November, we look at the market reaction to that and the long-term outlook for the WOW share price.

Woolworths Q1 sales in context

Here are the key revenue metrics for the company:

ASX WOW Q1 Sales Data

Source: Woolworths Group Ltd

CEO Brad Banducci noted that, ‘In October, Australian Food comparable sales growth was in the high single-digits, moderating over the month.

With Christmas coming up, sales could get a further boost, but consider the following.

The strong push off from the March market lows was partly due to the boosted sales from panic buying.

And then after that subsided, part of it could have been the hunt for yield as paltry as it may be.

The Woolworth’s dividend yield stands at 2.48%, at time of writing.

Part of the rise through to September could have also been as a sort of consensus defensive position similar to the US tech stock rally.

These companies aren’t rising because of a breakthrough product but because they’re seen as safe given they’re the only game in town.

Outlook for WOW share price

I wouldn’t be surprised to see the bout of sideways trading continue for a certain period.

The panic buying rally is dead now that Australia looks to largely be dodging the COVID-19 bullet, unlike other countries.

Yes, Woolies can roll out more efficient distribution centres, get a boost from Christmas sales and look forward to more hotels opening their doors…

But that still doesn’t change the fact that its P/E ratio stands at more than 40.

For a supermarket chain, not a tech stock, I might add.

That’s a steep valuation by most people’s standards.

With neither serious growth nor value credentials, it’s hard to see the WOW share price hitting the pre-crash heights of around the $43 mark in the immediate future.

As such, it would be well worth reading Greg Canavan’s report on his five favourite dividend stocks.

No banks and no supermarket chains are involved.

You can download that for free, right here.

Regards,

Lachlann Tierney

For The Rum Rebellion

 

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