Deutsche Bank remains bullish on Tesco (LON:TSCO) ahead of the group’s third-quarter and Christmas trading statement on January 11. The trading update will come as the company prepares to put its merger deal with Booker Group (LON:BOK) to a shareholder vote towards the end of February.
Tesco’s share price has slipped marginally into the red in today’s session, having given up 0.22 percent to 208.80p as of 14:57 GMT. The group’s shares are marginally outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.74 percent lower at 7,630.75 points.
Analysts upbeat on Tesco
Deutsche Bank reiterated its ‘buy’ rating on Tesco today, with a price target of 205.29p, expecting it to post the ‘most positive’ Christmas trading update. Proactive Investors reports that Britain’s biggest supermarket is expected to report 1.7-percent growth in UK like-for-like sales in the third quarter and a 3.2-percent gain in the six-week Christmas trading period following a 2.1-percent rise in the second quarter.
The Financial Times meanwhile quoted UBS analyst Daniel Ekstein as commenting that “Tesco has the strongest momentum of the Big Four [UK supermarket chains] coming into Christmas trading,” while adding that some pre-Christmas discounting could have been better for sales than margins.
Christmas update significance
The FT further quoted Laith Khalaf at Hargreaves Lansdown as pointing out that next month’s vote on Tesco’s proposed takeover of Booker group gave added significance to the FTSE 100 grocer’s Christmas update.
“A poor performance over the festive period would unsettle shareholders’ confidence in the deal,” he noted.
The shareholder vote will come after the Competition and Markets Authority recently cleared the acquisition, having concluded that it does not raise competition concerns. The conclusion followed an in-depth investigation of the deal.