Highlights
- Stock Increase: Shares of Wesfarmers gained 1.2%, reaching AU$76.37, with earlier gains of 1.5% to AU$76.58, marking the highest level since August 2024.
- Bunnings Outperformance: Analysts at Morgan Stanley expect Bunnings, Wesfarmers’ hardware chain, to outperform rival Metcash (MTS.AX) in 1H25, largely due to its strong exposure to trade services.
- Kmart Performance: Kmart is expected to continue benefiting from favorable trading conditions, despite recent struggles with Smiggle, a Premier Investments-owned brand.
Shares of Wesfarmers (ASX:WES) rose 1.2% to AU$76.37 on Wednesday, continuing a strong start to the year. At one point, the stock gained 1.5%, reaching AU$76.58, its highest level since August 2024.
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.