The Woolworths Group Ltd (ASX: WOW) share price has been in fine form so far this month, lifting by around 7%. This comes after the retail conglomerate last updated the ASX with its demerger of Endeavour Group Ltd (ASX: EDV) in late June.
At Monday's market close, Woolworths shares ended the day slightly down 0.51% to $39.32. However, it's worth noting that the company's share price reached a record high of $39.63 yesterday.
Let's take a closer look at what's been helping boost the Woolworths share price in recent weeks.
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What's impacting the Woolworths share price?
Back in 2019, Woolworths announced that it planned to demerge from its 85.4% holding in Endeavour. Although the restructure was completed in 2020, COVID-19 postponed the proposer demerger until 2021.
Woolworths stated that the reason for the split was to maximise its shareholder value over time. In addition, this would also create a simpler operating model which focuses on food and everyday needs.
As the retail conglomerate focuses on its core business, COVID-19 has also helped boost the company's share price. Despite restrictions being enforced by state governments, consumers still need to buy food and supplies.
During last year's lockdown in Australia, panic buying led the company to experience a significant increase in sales. This so-called "pantry stocking" translated to bumper profits for Woolworths in its H1 FY21 result.
It's possible that with half the country currently in lockdown and uncertainty around an endpoint, the company is revisiting the events of 2020.
Broker updates
Since announcing the completion of its divestment, two brokers cut their 12-month price target on Woolworths shares.
The first, Goldman Sachs, reduced its rating by 15% to $36.80 but placed a "hold" on the supermarket giant's shares in a report released on 28 June. The multinational investment firm noted several key upside possibilities. They included:
- Industry growth and operating leverage could improve as a result of Increasing product price inflation;
- Divestment of Big W leading to potential profits;
- Increase in its wholesale business to convenience stores; and
- Sustaining market share growth.
On the other hand, Goldman Sachs also made mention of key downside risks, noting:
- Increased competition against existing competitors;
- Operating deleverage from physical store sales declines;
- Longer than expected recovery in population growth; and
- Poor management of the scaling back last year's elevated costs.
Following suit on 5 July, Morgan Stanley decreased its outlook on Woolworths shares, citing a similar price target of $36.50, down 17%.
Woolworths share price summary
It's been a strong 12 months for Woolworths shares, which have jumped 15% to reach a record high of $39.63 yesterday. While it's anyone's guess where the company's shares will go from here, Woolworths appears to be proving its resilience in the face of the pandemic.
Woolworths presides a market capitalisation of roughly $49.85 billion, with more than 1.2 billion shares on its registry.
