Broker upgrade sends Coles (ASX:COL) share price surging higher

Coles shares are ending the week on a high…

| More on:
A man and woman put hands in the air as they dance in front of a green brick wall.

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 Coles Group Ltd (ASX: COL) share price is ending the week in style.

In afternoon trade, the supermarket giant's shares are up almost 3% to $18.00.

Why is the Coles share price racing higher?

The catalyst for the rise in the Coles share price on Friday appears to have been a bullish broker note out of Citi.

According to the note, the broker has upgraded the company's shares to a buy rating with an improved price target of $19.60.

Based on the current Coles share price, this implies a potential return of 9% for investors before dividends. If you include dividends, the potential return stretches to approximately 12.5%.

What did the broker say?

Citi has been looking through the retail sector and has upgraded its estimates and recommendations to account for expected trading conditions post-COVID.

While this led to an upgrade for Coles, it has led to Citi downgrading Metcash Limited (ASX: MTS) shares to a neutral rating with a $4.10 price target. The broker has also retained its neutral rating and cut its price target on Woolworths Group Ltd (ASX: WOW) shares to $39.50.

Why does Citi prefer Coles?

Citi's positive view on the Coles share price appears to be largely due to its valuation.

It recently commented: "Coles sales growth in Supermarket and Liquor accelerated in the last seven weeks compared to the first seven weeks update provided in August. Within Supermarkets, deflation of just 0.3% demonstrated improvement on 4Q21. The outlook for both inflation and volumes for the rest of FY22 is positive given supply chain cost pressures, moderating fruit deflation and pent up demand for gatherings of family and friends. […] We prefer Coles over Woolworths given the LFL sales growth differential is closing and Woolworths is trading at a ~25% premium to Coles."

Should you invest $1,000 in Coles Group Limited right now?

Before you buy Coles Group Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Coles Group Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended COLESGROUP DEF SET. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Share Gainers

Man standing on rock next to turquoise salt lagoon.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX 200 finally had a green session this hump day.

Read more »

Man pointing at a blue rising share price graph.
Share Gainers

Guess which ASX 300 stock just rocketed 17%!

Investors are sending the ASX 300 stock soaring higher on Wednesday. But why?

Read more »

A young woman wearing overalls and a yellow t-shirt kicks one leg in the air showing excitement over the latest ASX 200 shares to hit 52-week highs
Share Gainers

Why Firefly, Kelsian, NAB, and Zip shares are roaring higher today

These shares are having a good time on hump day. Let's find out why.

Read more »

A woman's hand draws a stylised 'Top Ten' on a projected surface.
Share Gainers

Here are the top 10 ASX 200 shares today

It was another tough day for investors this Tuesday.

Read more »

A man clenches his fists in excitement as gold coins fall from the sky.
Share Gainers

Why Dimerix, Evolution Mining, Inghams, and NextDC shares are charging higher today

These shares are rising when many are falling today. But why?

Read more »

A neon sign says 'Top Ten'.
Share Gainers

Here are the top 10 ASX 200 shares today

It was a rough trading day for ASX stocks this Monday.

Read more »

Two happy excited friends in euphoria mood after winning in a bet with a smartphone in hand.
Share Gainers

Why 4DMedical, Gold Road, Syrah, and Tyro shares are racing higher today

These shares are starting the week strongly. But why?

Read more »

Rising gold share price represented by a green arrow on piles of gold block.
Gold

2 ASX gold stocks racing higher in Monday's sinking market

Investors are sending these ASX gold stocks flying higher on Monday. But why?

Read more »