Treasure Chest: Trading Opportunity In Woolworths

This story features WOOLWORTHS GROUP LIMITED, and other companies. For more info SHARE ANALYSIS: WOW

What?

Analysts at RBS see a clear short term trading opportunity in Woolworths ((WOW)) shares. They set a target range of $25.29-25.77, which is 5-7% above yesterday's share price. (Woolworths shares are only up slightly on Friday despite an overall strong market performance).

Why?

Woolworths shares have been further de-rated since management's guidance at the full year result in August disappointed. The shares narrowly managed to stay above $24 after this week's trading update equally disappointed, again. While it is easy to see why investors have become rather lukewarm on what used to be the world's most expensively priced grocer back in 2007, RBS takes the view that overall sentiment has simply become too bearish and that the new management team thus has an easier task at hand to produce some positive surprises.

One such positive surprise may well come at Woolworth's upcoming Strategy Day, predicts RBS. Hence why the stockbroker recommends a Short Term Trading Buy to its clientele. Woolworths Strategy Day is scheduled for next Wednesday, November 2.

Background

Woolworths has featured regularly in presentations, broadcasts and market analyses by FNArena as the shares have gone through a gradual de-rating process since the forward looking Price-Earnings ratio peaked above 27 in 2007. This easily explains as to why Woolworths shares have proved less of a "defensive" asset post the GFC than would normally have been expected.

Interested readers can read more about Woolworth's de-rating  in this week's The Big De-Rating – A Guide Through The Minefields (2).

Woolworths also featured prominently in FNArena's Market Insight broadcast from September 24th which can be accessed via the following link:

http://www.brr.com.au/event/86879/greg-peel-senior-writer–rudi-filapek-vandyck-editor?log=1

FNArena's Stock Analysis shows Woolworths shares are trading some 13.5% below consensus price target (Friday morning). Still, only four out of eight stockbrokers, including RBS, currently rate the stock as a Buy.

Interesting detail: recent research by various stockbrokers has revealed that Coles ((WES)) and Woolworths shares have in the past been major beneficiaries from RBA rate cuts.

 
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