Sainsbury’s share price outperforms as UBS remains bullish on grocer

Shares in J Sainsbury (LON:SBRY) have jumped in London in today’s session as analysts at UBS reiterated their ‘buy’ rating and lifted their price target on the blue-chip grocer. Proactive Investors quoted the broker as arguing that the blue-chip supermarket could absorb at least 132 store closures as part of its proposed tie-up with Walmart’s Asda which is currently undergoing a competition probe.

As of 13:44 GMT, Sainsbury’s share price had added 2.51 percent to 286.00p, outperforming the broader market rally which has seen the benchmark FTSE 100 index gain 1.36 percent to 6,839.03 points so far today. The group’s shares have added just under 10 percent to their value over the past year, as compared with about an 11-percent drop in the Footsie.

UBS upbeat on Sainsbury’s

UBS maintained its ‘buy’ rating on Sainsbury’s today, while lifting its price target on the shares from 400p to 435p. Proactive Investors quoted the analysts as saying that the blue-chip grocer would be able to absorb at least 132 store closures to get its deal to buy Asda approved by the Competition and Markets Authority (CMA) which is currently investigating the merger.

“Assuming zero disposal proceeds, merger economics can absorb at least circa 132 remedy stores and potentially dozens more (given flexiblity in gross-to-net price investment), whilst still achieving targeted return on invested capital of more than 10 percent,” the analysts elaborated, adding that they saw scope for the deal to close even if the CMA adopted a narrow market definition.

Other analysts on grocer

JPMorgan Chase & Co reaffirmed Sainsbury’s as an ‘underweight’ last week, without specifying a valuation on the shares. According to MarketBeat, the company currently has a consensus ‘hold’ rating and an average price target of 314p.

As of 14:09 GMT, Tuesday, 29 January, J Sainsbury plc share price is 286.20p.