Exane BNP Paribas has lowered its rating on Wm Morrison Supermarkets (LON:MRW) following news that blue-chip rival Sainsbury (LON:SBRY) is merging with Walmart’s Asda. The tie-up comes amid stiff competition in the UK grocery market with German discounters pressuring the ‘Big Four’ supermarkets.
Morrisons’ ‘share price has jumped in London this afternoon following a morning dip and was 1.58 percent up at 243.80p as of 13:05 BST. The stock is outperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.41 percent higher at 7,533.20 points. The group’s shares have added more than one percent to their value over the past year, as compared with about a 4.6-perent gain in the Footsie.
Exane trims grocer’s rating
Exane BNP Paribas lowered its rating on Morrisons from ‘overweight’ to ‘neutral’ with a price target of 250p on the shares following news of Sainsbury’s merger with Asda. Proactive Investors quoted the analysts as saying in a note to clients that they think that Morrisons could face more competition if the big merger goes through, although it believes the firm “could be considered a consolation prize”.
They added that while the prospect of a counter bid might be there, Morrison’s now prides itself on disciplined capital allocation so it seems an unlikely suitor and Tesco seems too big. They concluded that a third party – private equity – bid might be possible but the probability seems low.
Other analysts on Morrisons
The 13 analysts offering 12-month price targets for Morrisons for the Financial Times have a median target of 235.00p on the shares, with a high estimate of 275.00p and a low estimate of 170.00p. As of April 27, the consensus forecast amongst 19 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.