Woolworths Group Ltd (ASX: WOW) shares have been on a tear lately, having bounced from their 52-week low of $30.49 apiece in May.
The supermarket giant has caught a strong bid since then, with its stock price up more than 15% to trade at $35.15 currently. You can see this performance in the chart below.
Despite the growth, a new report suggests that Woolworths may not be as well-positioned as its competitors. Here's a closer look.
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Woolworths' competitors in pursuit
The 2024 Supermarket Supplier survey conducted by UBS reveals that Woolworths may be set to lose market share to competitors like Aldi and IGA.
UBS' survey, the 36th of its kind, indicated that major rival Coles Group Ltd (ASX: COL) is also gaining ground on the 'fresh food people'.
Coles now leads its rival in 15 out of 26 subcategories – up from 14 in January, according to The Australian.
UBS analyst Shuan Cousins noted that while the Australian Supermarket's revenue outlook remains positive, growth is "not as buoyant as in prior years".
As cost-of-doing-business (CODB) pressures moderate, gross margins are expected to rise "at a lesser rate". The broker sees Woolworths shares placed behind Coles and Metcash Ltd (ASX: MTS).
Company-specific performance is becoming an increasing driver and favours Coles and Metcash, with Woolworths less well placed, having led the market over recent years.
Regulatory pressures have weighed on [price-earnings-ratio] P/E multiples since Dec-23, yet this uncertainty is expected to moderate as existing recommendations (including a mandatory code) likely to be implemented are as expected; and investigations are coming to an en end, with the last being the ACCC, although this is the most important
You can compare the performance of all three of these shares this year to date in the chart below.
UBS recently downgraded its estimates for Woolworths shares in a separate note to clients. According to my colleague Tristan, the broker reduced its estimates on Woolworths' earnings per share (EPS) to $1.32 in both FY24 and FY25, respectively.
The broker's cautious stance stems from lower earnings forecasts due to weak food sales and potential slowing at Big W.
At the current share price of $35.15, this equals a forward P/E ratio of 26 times, implying you pay $26 for every $1 of Woolworth's future earnings.
UBS has a neutral rating on Woolworths, with a price target of $32.50.
Goldman Sachs: A different take
In contrast, Goldman Sachs sees potential in Woolworths shares. The broker believes the stock is undervalued and has a strong market position.
In fact, it sees tailwinds behind both Coles and Woolworths, conceding that Coles "remains a strong operator into Q4 FY24 with a higher perception of value to consumers".
Goldman has a buy rating on Woolworths shares with a price target of $40.20.
Foolish takeaway
Woolworths shares are at a crossroads, with differing opinions from top brokers. UBS is cautious. It highlights competitive pressures and slower growth. Meanwhile, Goldman Sachs sees an undervalued opportunity with strong future potential.
Investors should weigh these perspectives and consider their own long-term goals before making decisions. Broker opinions, at the end of the day, are just that – opinions. As always, conduct your own due diligence and speak to a professional when needed.
