The usual knee-jerk response is to now label Woolworths (WOW) shares as an excellent opportunity for long term oriented investors
The usual knee-jerk response is to now label Woolworths (WOW) shares as an excellent opportunity for long term oriented investors. Because, you know, what only one year ago traded above $38 a pop is now available for less than $30. This must be the world's biggest bargain (cue: be greedy when others are faithful, says the Oracle of Omaha). Taking a leaf from the Coca-Cola Amatil (CCL) experience, however, suggests this story has a lot more chapters in it. Investors looking at the past 15 years are likely to ignore the fact that Woolworths' core operations enjoy a world beating EBIT margin of 8%. That margin is now going to drop. How far? How far exactly is going to determine the outlook for the share price. Still confident Woolworths shares are a bargain below $30? Watch that margin. Small erosion on $47bn in annual sales can have a huge impact. Just ask analysts at Morgan Stanley who, post Friday's admission something's rotten inside the Woolworths kitchen, have lowered their price target to $24. My Weekly Insights this week: (VIEW LINK)
Welcome to Livewire, Australia’s most trusted source of investment insights and analysis.
To continue reading this wire and get unlimited access to Livewire, join for free now and become a more informed and confident investor.