Over the last 12 months the Wesfarmers Ltd (ASX: WES) share price has underperformed the benchmark S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) with a decline of almost 7%.
Whilst this is disappointing for shareholders, one broker appears to believe that it could be a buying opportunity for non-shareholders.
What has the broker said?
According to a note out of Credit Suisse this morning, the broker has upgraded the retail conglomerate's shares to an outperform rating from neutral.
In addition to this, analysts at Credit Suisse have increased the price target on Wesfarmers' shares to $44.98. This price target is approximately 10% higher than its last close price of $40.88.
The catalyst for this change of rating by its analysts has largely been an upgrade to its valuation of the local Bunnings business.
Further drivers have been its prediction that the struggling Bunnings UK business will be dealt with by the end of the year and its belief that the market is being too pessimistic on its Coles supermarket business.
Should you buy Wesfarmers' shares?
While I do agree in part with Credit Suisse, I'm not a buyer of its shares just yet.
Until the Bunnings UK problem is dealt with fully, whether that be through a recovery or divestment, I'm staying away from the company.
As we have seen previously with rival Woolworths Group Ltd (ASX: WOW) and its Masters disaster, a situation like this can be hugely costly and weigh heavily on a company's results and shares.
Furthermore, I don't believe the 10% potential gain on offer from the broker's price target is enough of a reward for the risks that lay ahead.
Because of this, I would sooner buy retailers such as Lovisa Holdings Ltd (ASX: LOV) and Noni B Limited (ASX: NBL) ahead of Wesfarmers.
