Leading broker tips Super Retail (ASX:SUL) share price to rocket higher

The Super Retail Group Ltd (ASX:SUL) share price has been tipped to climb significantly higher from here by one leading broker…

| More on:
A compass with the word opportunities is shown in black and blue representing a broker upgrade on the EML share price

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Super Retail Group Ltd (ASX: SUL) share price has been a strong performer over the last six months.

During this period, the retail conglomerate's shares have charged an impressive 42% higher.

Can the Super Retail share price go even higher?

If you missed out on the stellar gains made by the Super Retail share price over the last six months, don't worry. This is because one leading broker believes they can go a lot higher from here.

In response to its impressive trading update earlier this week, Goldman Sachs has reiterated its buy rating and lifted the price target on Super Retail's shares to $14.80.

Based on the current Super Retail share price, this price target implies potential upside of 29% for its shares over the next 12 months. This potential return increases to almost 36% when you include the generous dividends the broker is expecting the company to pay.

Goldman Sachs has forecast a fully franked dividend of 78 cents per share in FY 2021. This equates to a 6.8% dividend yield at present.

Why is Goldman Sachs bullish on Super Retail?

The broker believes Super Retail is perfectly positioned to benefit from the current trading environment. It explained:

"SUL has continued to position itself extremely well to capture the unique trading environment we have seen over much of 2020, and in particular has made the most of the reopening of the Australian economy as households have increasingly shifted to outdoor activities and road travel over the summer period."

"As we have noted before, while much of the consumer spending patterns seen over 2020 are unlikely to be sustained, we expect the international travel restrictions associated with the pandemic to provide a medium-term tailwind to SUL. Furthermore, the weakness experienced by SUL during the post bushfire period in 2H20 is likely to provide an easy base to cycle."

In respect to its expectation for a big dividend this year, the broker commented:

"We forecast strong cash generation conditions to continue through 1H21, bringing forecast net cash to A$119mn in 1H21 and A$171mn in FY21. We forecast a recovery in dividend payout ratio to ~60% over FY21, translating to a forecast FY21 dividend of A$0.78 per share, implying a 6.7% [at the time] fully franked dividend before contemplating capital management."

All in all, this appears to make the Super Retail share price one to watch in 2021.

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

More on Retail Shares

a thoughtful shopper with shopping bags wearing sparkly gold dress and matching shoes reclines on a chair with hand to chin in thought.
Retail Shares

ASX retail stock down 92% in 16 months faces 'challenging outlook': expert

It's been a big fall from grace for this ASX retail stock after being the fastest riser of the All…

Read more »

A warehouse worker is standing next to a shelf and using a digital tablet.
Retail Shares

The pros and cons of buying Wesfarmers shares this month

There’s a lot to think about with this impressive retail giant…

Read more »

a woman wearing fashionable clothes and jewellery checks her phone with a satisfied smile on her face in a luxurous home setting.
Retail Shares

Why I think this ASX small-cap stock is a bargain at $7.85

I think this small company has big potential.

Read more »

A happy young couple celebrate a win by jumping high above their new sofa.
Retail Shares

Overinvested in Wesfarmers shares? Here are two alternative ASX retail stocks

These stocks could complement an investment in Wesfarmers.

Read more »

Happy shopper at a clothes shop.
Retail Shares

The share price of this All Ords stock has jumped higher again. Here's why

Here's why Myer's share price is outperforming.

Read more »

A smiling woman at a hardware shop selects paint colours from a wall display.
Retail Shares

Wesfarmers shares recently hit a 52-week high. Can they go higher?

This business continues to impress investors.

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
Retail Shares

Would Warren Buffett buy Lovisa shares right now?

Is this a sparkly opportunity?

Read more »

Happy shopper at a clothes shop.
Earnings Results

Why did Myer shares just rocket 9%?

Investors are piling into Myer shares on Friday. But why?

Read more »