Tag: ASX:WOW

Whilst the grocery industry’s profitability is improving, (as the industry becomes more rational), we’re cautious on Woolworths’ share price due to valuation concerns.

Industry analysis shows Woolworths sales momentum is slowing. With the stock now trading 23 x consensus FY19 earnings, on a forward yield of 3.3%, there seems little margin for disappointment.

We continue to track Woolworths for a new “higher low” formation, at which point the stock will be added into the ASX 50 model at a discount to the current trading range.

Woolworths 1H18 EBIT was up 10% on the same time last year and 1H18 NPAT came in at $900 million, an increase of 15%.

Earnings Per Share (EPS) for FY18 is likely to be around $1.35 and if we assume moderate growth into FY19 and FY20, with an EPS range $1.40 to $1.60, the stock trades on a forward yield of 4.1%.

On the above calculation, fair value for WOW is near the $26.50 range.

Woolworths

Our ALGO engine triggered a sell signal on WOW on November 2nd at $26.05.

Since then the share price has lifted over $1.00 as speculation continues surrounding the ACCC’s decision to reject BP’s offer to buy WOW’s 500 petrol station network.

A potential “triple top” formation is in play in the $27.70 range and we suggest exiting long positions for now.

CFD traders can look to sell WOW on our SAXOGo Platform in the $27.30 area with an initial target of $26.15 and a $28.10 stop.

Woolworths

Shares of WOW were full of holiday cheer as they hit a 4-month high of $27.55 in early trade.

The internal momentum indicators have been in overbought territory for over a week, so we suggest shareholders look to take profits above $27.20.

Our ALGO engine signalled  a sell signal at $26.50 on November 2nd. We see the next key level of support for WOW at $26.60.

Woolworths

We continue to like WOW as a low risk income play in client portfolios. Our Algo Engine generated a recent buy signal in Woolworths and the stock is held in our top 20 and top 50 model.

Price target of $27. Investors may choose to add a covered call to boost the cash flow.

1Q18 sales update today shows growth in customer transactions driving Australian Food comparable sales growth for the quarter of 4.9%.

Strong double-digit online sales growth in both Australian and New Zealand Food assisted by the rollout of Pick up to all Woolworths and Countdown supermarkets.

Solid sales growth in Endeavour Drinks, with the sales performance of BWS a particular highlight.

Woolworths will report their first quarter sales for FY18 on the 31st of October. We expect continued growth of around 5%  from the key Food and Liquor business, while Big W is likely to struggle.

FY18 total revenue if forecast to be $58b, EBIT, $2.5b delivering underlying net profit of $1.6b.

EPS $1.35 and DPS of $1.00, places the stock on a forward yield of 3.5%.

Our Algo Engine generated a buy signal in Woolworths near $25, we see this as fair value and when complimented with a covered call, we’re delivering 10 – 12% per annum in cash flow ASX:WOW

Woolworths

Shares of WOW traded down to $24.40 last Tuesday; nearly reaching the key support level of $24.20 noted in our October 5th blog.

Prices have bounced since then as wholesale food reports show that deflation is returning to the fruit and vegtable market.

Last week’s report showed a -2.3% price growth, which improves the margins on WOW’s private label brands, as well, as fresh produce.

We see the next level of price resistance in the $25.60 area and consider WOW reasonable buy/write opportunity at current levels.

Woolworths

On August 23rd, shares of WOW traded as high as $27.75. The current price of $24.60 is over 11% lower in just over a month.

Yesterday the ACCC announced that it will delay its final decision on BP’s proposed $1.8 billion acquisition of WOW’s 527 petrol station sites.

This delay isn’t a bullish factor for the company, but we expect the deal to get over the line and support the share price.

Technically, there is a support level in the $24.20 area which dates back to January of this year. This support level could be tested in the near-term.

Woolworth’s

Keep Woolworths on your radar as we’re likely to see an exhaustion to the current selling pressure and a bounce higher.

Woolworths