The Woolworths Limited (ASX: WOW) share price has bounced back over the past year, yet a number of analysts are still calling it a buy.
Woolworths share price
As can be seen in the chart above, Woolworths shares have outperformed the market, or S&P/ASX 200 (Index: ^AXJO) (ASX: XJO), by around 10% over the past year. Meanwhile, the share price of its number-one competitor Wesfarmers Ltd (ASX: WES) has underperformed by a similar amount.
Looking further back, however, Woolies has struggled to keep pace with its key rival and the market, having fallen from over $37 to below $21 a year ago, over a few short years.
The company's woes stem from its supermarket underperformance, which saw it lose ground to Coles and Aldi. However, it also came as a result of Woolworths' poorly executed Masters business, which was sold along with Home Timber and Hardware, despite years of significant investment in the project.
Is Woolies a turnaround?
After rallying from its recent lows to almost $27, some investors and analysts have warmed to the idea of a Woolworths turnaround. Indeed, at its current share price, four analysts have a 'buy' rating on the company, according to a survey of 16 analysts by The Wall Street Journal. That's up from just two bullish analysts three months ago.
However, it's worth noting that five analysts have a 'sell' rating on the company, resulting in an average share price target of $26.30 — 2% below today's market price.
Foolish Takeaway
Gazing at analyst price targets can give you a sense of what 'the market' is thinking. But if you do the average thing (i.e. what the market does), you will always get average results.
I take analyst ratings and price targets with a pinch of salt. However, I too believe Woolies is a hold today — not a buy nor sell. I think its recovery still has some way to go and its shares appear to be priced fairly given the range of likely outcomes.
