Wesfarmers Ltd (ASX: WES) shares have shot into the green this year, continuing their strong momentum from 2024.
Shares in the retail conglomerate currently fetch $76.90 apiece, more than a 6% gain for the new year.
The big question for investors now is what's next for the retail and industrial giant. Let's see what the experts think.
Wesfarmers shares have started 2025 well, and a January note from Goldman Sachs could explain part of this.
Goldman upgraded Wesfarmers shares to a buy with a new price target of $78.70.
The broker believes the conglomerate has several drivers that could continue to push its earnings and valuation higher in 2025 and beyond
It is particularly bullish on Bunnings, which it sees outperforming its competition in the home improvement market.
The firm highlights that Bunnings' sales per square metre (sqm) still lag behind major US counterparts, such as Home Depot, leaving "ample headroom for sales per sqm growth".
It also notes that Bunnings' website traffic has now surpassed that of Woolworths Group Ltd (ASX: WOW)'s Australian food division. Given the size of the numbers we're talking about here, I think that's something to note.
At the time of writing, Wesfarmers' market capitalisation is $87 billion, compared to Woolworths' $36 billion.
Goldman is notably against the broker crowd here. According to CommSec data, the stock is rated a sell by the consensus of broker estimates.
This is made from two holds, five buys, and nine sell ratings on Wesfarmers shares.
Wesfarmers made the decision to shut down its Catch business last month, where it will cease operating as a standalone business.
As my colleague James reported, the online retailer, acquired by Wesfarmers in 2019 for $230 million, struggled against increasing competition in Australia's e-commerce sector.
Managing director Rob Scott said gains in "competitive intensity" throughout the online retail space in Australia hit Catch's growth outlook.
Still, Scott believes the acquisition had some secondary benefits. Like that it "significantly enhanced" Wesfarmers' "data and digital operations".
The conglomerate recorded more than $3 billion in online revenues in FY24, along with "220 million monthly digital interactions" with its customers.
Put against the Catch acquisition price of $230 million, that works out to be $1.04 per digital interaction.
Still, some investors were obviously happy with Catch's disposal. Wesfarmers shares are up from $71.74 apiece since the day it was announced.
Despite the fact Goldman Sachs is bullish on Wesfarmers, the consensus of analyst estimates sees it the other way.
Still, Wesfarmers has plenty going for it, being one of the largest retail operations in the nation.
Does that make it a good investment? Time will tell, more so now that management is under pressure to maintain the pace of recent growth.
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