Tesco share price: JPMorgan Cazenove remains bearish on grocer amid valuation concerns

on Oct 7, 2016
Updated: Oct 21, 2019
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JPMorgan Cazenove argues that Tesco’s (LON:TSCO) share price will have to fall by a fifth before it represents decent value, the analysts have said, as quoted by Proactive Investors. The comments come in the wake of the grocer’s interim results earlier this week when the company revealed that its sales recovery had continued in the first six months of its financial year and announced plans to lift its operating margin.

Tesco’s share price meanwhile has fallen into the red in today’s session, having shed 0.87 percent to 200.15p as of 10:10 BST. The stock is underperforming the broader London market, with the benchmark FTSE 100 index currently standing 0.72 percent higher at 7,050.59 points, boosted by a hefty fall in sterling. The grocer’s shares have added just under 34 percent this year, as compared with a near 13-percent rise in the Footsie.
JPMorgan Cazenove reiterated its ‘underweight’ recommendation on Tesco yesterday, and its price target of 135p on the stock, arguing that detailed analysis had revealed that the quality of the group’s earnings ‘beat’ was ‘rather low’.
“We separately believe [chief executive] Dave Lewis has set himself challenging targets in the context of a very difficult industry backdrop, where all the different moving parts are not within his own control,” the analysts pointed out in a note to clients, as quoted by Proactive Investors, adding that they believed that Tesco’s share price stood at “the higher end of an optimistic guidance”.
Other analysts also remain bearish on Britain’s biggest grocer, with Goldman Sachs reiterating its ‘sell’ stance on the stock today, with a price target of 142. Credit Suisse meanwhile continues to see Tesco as an ‘underperform,’ valuing the shares at 130p.
As of 10:35 BST, Friday, 07 October, Tesco PLC share price is 166.03p.

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