Wesfarmers Shares Rise 1.2% as Morgan Stanley Highlights Strong Prospects for Bunnings and Kmart

January 29, 2025 02:25 PM AEDT | By Team Kalkine Media

Wesfarmers Shares Rise 1.2% as Morgan Stanley Highlights Strong Prospects for Bunnings and Kmart — Image source: Shutterstock

Morgan Stanley’s Positive Outlook on Bunnings and Kmart

Morgan Stanley analysts have expressed confidence in Wesfarmers' Bunnings hardware chain, expecting it to outperform Metcash (ASX:MTS) in the first half of FY25, thanks to Bunnings’ over-exposure to trade services, a key segment that should continue to drive growth.

The analysts also expect Kmart to perform well, benefiting from favorable trading conditions. They highlighted potential upside from the underperformance of Smiggle, a Premier Investments (ASX:PMV)-owned brand, which has faced challenges in recent times.

Focus on Online Competition and Tariff Impacts

As part of their analysis, analysts are also watching for any comments from Wesfarmers regarding online competition from emerging players like Temu (owned by PDD) and established giants such as Amazon (AMZN.O). In particular, investors will be looking for insights on how tariffs could impact Kmart and the potential for growing exposure to underutilized factories in China.

Morgan Stanley’s Rating and Price Target

Despite the positive outlook for Bunnings and Kmart, Morgan Stanley maintains an "underweight" rating on Wesfarmers, with a price target of AU$60.7. However, the stock has performed well this year, rising 6.7% year-to-date as investors remain optimistic about Wesfarmers’ diverse operations.

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