Broker tips: Tesco, Sainsbury's, B&M, Berkeley, RWS Holdings

(Sharecast News) - Citi has readjusted a host of ratings and target prices across the European retail and brands sectors amid a "lacklustre" macro outlook, highlighting UK-listed Tesco among its key 'buys'. The bank raised its recommendation on fellow supermarket chain Sainsbury from 'neutral' to 'buy' (target price raised to 349p from 333p), but downgraded discounter B&M European Value Retail from 'buy' to 'neutral' (target cut from 215p to 165p). Tesco's target price was lifted to 510p from 460p.

Citi said it sees just a 1.1% increase in the amount of cash available to consumers for discretionary expenditure in 2026, with grocery inflation set to fall to 3% from 4.2% over 2025 to date.

"We see potential headwinds for discretionary retail at the 'value' end given the growing popularity of C2C fashion; albeit the EU bringing forward legislation to close the 'de-minimis' loophole in 2026 should be welcome news for the sector," the bank said.

Meanwhile, the impact of the UK's business rates reform was "not as bad as feared" for the sector, while the full effect of trade tariffs should impact supply chains in 2026.

"With the backdrop of a lacklustre macro, we prefer operators that we believe can leverage their business models and / or gain share e.g. via store optimisation and retail media."

Analysts at RBC Capital Markets bumped up their target price on Berkeley from 3,700p to 3,900p on Thursday as it did "some necessary housekeeping" to its estimates to reflect recent growth in net asset value per share and guidance.

RBC Capital said Berkeley was "like a swan", noting that "the serene, smooth and graceful performance we see masks the hard work going on below the surface", as the firm manages "blustery market winds and the ebbs and flows of planning regulations".

"In challenging times there are few surprises for Berkeley's shareholders," said RBC.

The Canadian bank stated Berkeley believes that the housing market tide was in the process of turning, but that we have not yet reached the inflexion point, and despite the long-term attractions, the feel good factor has "yet to take to the London stage".

While RBC Capital reiterated its 'underperform' rating on the stock, it remains "equally impressed" by Berkeley's ability to deliver whatever the weather.

"We have done some necessary housekeeping to our estimates to reflect the growth in net asset value per share and the guidance both within today's results statement and our interpretation of the additional colour provided during the analyst meeting. We have also tweaked down our valuation multiple from 1.1x to 1.0x to reflect the absence of the necessary feel good factor and the fact that, although changes to planning and regulation are in the pipes, those pipes appear to be blocked in places rather than free flowing," concluded RBC.

Berenberg lowered its target price on RWS Holdings from 210p to 170p on Thursday following the content solutions firm's full-year results.

Berenberg said RWS' results for the year ended 30 September were previously trailed at its full-year trading update on 28 October, with revenues down 4% year-on-year at £690m, while adjusted pre-tax profits sunk 43% to £60.4m.

The German bank noted that new medium-term guidance has also been provided, with management targeting growth to accelerate from low-single digits, and a rebuild in profitability as RWS further shifts to become a technology-led AI service leader.

"We align our forecasts with prevailing consensus (de minimis changes) with the view that this becomes a base from which to build over time," said Berenberg. "We think the group's new model (which clarifies the group's value add proposition, and use of technology) and easier-tounderstand proposition should offer upside from a starting point of just 5.6X FY26 P/E on our updated forecasts."

Berenberg also reiterated its 'buy' rating on the stock.