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Coles Group Ltd (ASX:COL) has had an impressive run in 2024, with shares surging 18.7% year to date, closing at AU$19.12 on Tuesday. This outpaces the S&P/ASX 200 Index (ASX:XJO), which has risen by 7.2% during the same period. Shareholders have also benefited from a steady dividend payout, with 64 cents per share paid over the last 12 months.
Coles Shares: Analyst Ratings
According to data from CommSec, the consensus rating on Coles shares is a "hold." Out of the 16 analysts covering the stock, five have rated it a "buy," nine suggest holding, and two recommend selling. This mixed response reflects the uncertainty surrounding the stock’s future performance.
Bullish Views: Why Some Analysts are Recommending a Buy
Some analysts are optimistic about Coles' prospects, citing the company’s solid financials and potential for future growth. Citi, one of the more bullish brokers, has reiterated its "buy" rating, setting a price target of AU$21. Citi forecasts fully franked dividends of 73 cents per share in FY25 and 85.5 cents in FY26, reflecting confidence in Coles’ ability to generate steady returns for shareholders.
Macquarie is similarly optimistic, with a price target of AU$20.20. The broker praised Coles' FY24 performance, particularly its margin improvements, and believes that the company’s cost-saving initiatives will pave the way for continued growth in FY25.
UBS is another firm backing the supermarket giant, giving it a "buy" rating and a target price of AU$19.50. UBS cited Coles' strong fundamentals and consistent dividend growth as key reasons for their positive outlook.
Cautious Views: Is Coles Overvalued?
On the other side of the coin, some analysts are more cautious, raising concerns that Coles shares may be overvalued after their recent rally. Goldman Sachs, for example, holds a neutral rating with a price target of AU$18, implying a slight downside from the current price. The firm argues that the market might have gotten ahead of itself, and that Coles' valuation may not fully justify its recent outperformance.
Coles is currently trading at a price-to-earnings (P/E) ratio of 22 times, slightly above the broader market’s P/E of 20 times. This premium valuation has led some analysts to question whether the stock can sustain its upward momentum, especially given its status as a defensive, recession-proof stock that typically benefits from stable but unspectacular earnings.
