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Is the Wesfarmers (ASX:WES) share price too cheap to ignore?

The Wesfarmers Ltd (ASX: WES) share price has fallen to around a six-month low. Is it now too cheap to ignore?

Is the Wesfarmers share price an opportunity?

One of the strategies that some investors like to use is ‘buy the dip’. It obviously makes sense that a lower price is more attractive than a higher price.

We don’t know when a particular share price is going to drop. Or when the entire ASX share market is going to drop. If you did know, you would be a multi-millionaire in no time! There could also be some questionable ethics with that..

Anyway, Wesfarmers shares have dropped. It now seems like the best time to buy since the middle of October 2021.

I guess that’s not too surprising. In 2020 there was a huge boom of demand for home DIY projects, home office products and learning-at-home products as COVID sent the nation into lockdown. Boom times for Officeworks and Bunnings.

Last year saw more strong retail sales for the first half of the 2021 calendar year. This was good for the Wesfarmers share price.

But FY22 sales have been slowing down.

HY22 trading update

Wesfarmers recently gave investors an insight into what the HY22 result may show. Year on year, Kmart and Target sales dropped 10% in the first half of FY22. Catch, Wesfarmers’ online marketplace business, has seen gross transaction value rise just 1% year on year – though it was up 97.5% over two years.

The retail powerhouse said that it’s expecting net profit after tax to be between $1.18 billion to $1.24 billion. This was supported by pleasing results in Bunnings and Wesfarmers’ chemicals, energy and fertilisers business. Kmart Group and Officeworks were impacted by COVID disruptions and costs.

In HY21, Wesfarmers made $1.4 billion of continuing operations, underlying net profit. That suggests the company is projecting a bit of a decline of profit.

Time to jump on the Wesfarmers share price?

Whilst the Wesfarmers share price has dropped 10% this year, it’s still not exactly ‘cheap’ in my view. According to CommSec, the Wesfarmers share price is valued at 25 times the estimated earnings for the 2023 financial year.

However, I do view it as one of the best ASX blue chips because of the diversification it provides.

I think its lithium exposure with the Mt Holland project will also help the company with earnings growth and diversification once it’s fully operational in a few years.

Wesfarmers seems like it has won the takeover battle for Australian Pharmaceutical Industries Ltd (ASX: API) and there is also speculation that it might be trying to buy Greencross Vets (which includes Petbarn).

Overall, I’d be happy to start with a small amount of Wesfarmers shares today and buy more if it saw any further drops.

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