UBS - Upgrade WOW to Buy, page-4

ahh UBS, they will be seen as way too early to pull the buy call.
the competition story is still yet to play out in a significant way.
bottom of the cycle EBIT/EBITDA margins are typically 3-4% and still a way to fall...
price investment never worked for tesco in the UK and nor will it work for woollies.
Woollies biggest problem is that discounters can compete on 80% sales with 20% of the SKU's
Woollies has the overheads of stocking 80% of the SKU's that make 20% of sales - effectively woollies has diseconomies of scale as the premium product over the discounters like Aldi. No amount of "price investment" is going to win them out of a structurally weaker business model.
Add to that LIDL is making their entry soon, and Amazon too and you realise there is a long way to go before woollies looks cheap enough to buy.
Remember that many years ago when EBIT/EBITDA margins for woollies were 3-4%? That was the time when franklins, Bi-lo and a host of other discounters were around. EBIT margins only recovered when the market was consolidated - and we are a long way away from that consolidation occuring.
I think UBS is way too bullish, my view we are headed to $15 over the medium term. Any excitement over sales growth over the short-term is likely to be short lived.