Skip Header
Important information: The value of investments can go down as well as up so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This is a third-party news feed and may not reflect Fidelity’s views.

JPMorgan Cazenove cuts Tesco, Sainsbury's price targets

(Sharecast News) - Tesco and Sainsbury's were in the red on Friday after JPMorgan Cazenove cut its price targets on the shares, saying it remains cautious on the UK grocery space fundamentally, which based on its investor feedback "appears still to be a contrarian stance". In a collaborative report between European Equity & Credit Retail, the bank said it had taken a closer look at potential upcoming catalysts for its more cautious stance on UK food retail.

"These include bearish read across from US & European peers to the UK grocers, an imminent mechanic slowdown in the UK grocers' top line momentum (mirroring those of international peers, recent developments at which we detail in this note), heightened price competition clouding gross margin outlook, and reduced market share donor-status from Morrison, given prospective balance sheet strengthening," it said.

The bank cut its price target on Sainsbury's to 223p from 245p and on Tesco to 220p from 230p. Both rare rated 'underweight', along with B&M European Value Retail.

"The three seem actionable to us now in the context of: expectations that look MSD-DD% too high into the new year, 15-25% share price outperformance in the last 6-12M, leading to shares trading on 10-25% premium versus the sector, and investor sentiment which appears complacent," JPM said.

It added that from a credit perspective, actionable trades are less obvious. "Fundamentally, we think Asda is trading too tight and the market is applying too high a probability of a near-term refinancing," it said.

The bank remained 'underweight' Asda and said that Morrisons benefits from balance sheet optionality and a longer maturity runway.

"However, recent news flow (here) means spreads do not appear as compelling, and thus we retain a neutral recommendation."

At 1400 GMT, Tesco shares were down 1.5% at 294.30p, while Sainsbury's was 1.9% lower at 276.10p.

Share this article

Related Sharecast Articles

Entain CEO steps down after just five months
(Sharecast News) - Sports betting and gaming group Entain has revealed that chief executive Gavin Isaacs has left the company with immediate effect after just five months.
Broker tips: Spectris, FeverTree Drinks, Warpaint London
(Sharecast News) - JPMorgan Cazenove upgraded Spectris on Monday to 'overweight' from 'neutral' and hiked the price target to 3,450.0p from 2,650.0p.
Berenberg raises target price on Warpaint London
(Sharecast News) - Analysts at Berenberg slightly raised their target price on cosmetics firm Warpaint London from 680.0p to 700.0p on Monday, noting the group's margin management was not to be overlooked.
UK Oil & Gas reports increase in production at Horndean
(Sharecast News) - UK Oil & Gas reported a significant increase in production at the Horndean oil field on Monday, following a successful workover campaign in late 2024.

Important information: This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice. When you are thinking about investing in shares, it’s generally a good idea to consider holding them alongside other investments in a diversified portfolio of assets. Past performance is not a reliable indicator of future returns.

Award-winning online share dealing

Search, compare and select from thousands of shares.

Expert insights into investing your money

Our team of experts explore the world of share dealing.