Tesco share price: Shore Capital sees supermarket as undervalued

on Jan 29, 2019
Updated: Mar 11, 2020
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Shore Capital remains bullish on Tesco (LON:TSCO), arguing that if earnings forecasts remain on track then the stock is ‘undervalued,’ Citywire reports. The comments follow news that Britain’s biggest grocer is planning to 15,000 jobs and close some fresh food counters and bakeries.

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Tesco’s share price fell in the previous session, giving up 1.73 percent to close at 221.00p, underperforming the broader UK market, with the benchmark FTSE 100 index shedding 62.12 points to close 0.91 percent lower at 6,747.10. This morning, shares in the grocer have gained ground, having added one percent to 223.20p as of 08:03 GMT, as compared with a 0.50-percent gain in the Footsie.

ShoreCap weighs in on Tesco

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Shore Capital reiterated its ‘buy’ rating on Tesco yesterday following news that the blue-chip grocer was finalising plans which could see the company axe as many as 15,000 jobs.

“If full-year 2020 earnings estimates remain intact, there may be upgrade potential should a number of recent headwinds faced by the business become tailwinds, if so then the stock appears undervalued to our minds,” the broker’s analyst Clive Black commented, as quoted by Citywire, adding that with strong free cash generation, there was scope for the company’s “stated dividend cover target of two times to be reached sooner rather than later, with scope for special distributions and/or buy-back activity”.

Other analysts on supermarket

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Berenberg Bank is also bullish on Tesco, having reaffirmed the grocer as a ‘buy’ last week, with a price target of 295p on the stock while earlier this month, Goldman Sachs, which rates the company as a ‘buy,’ trimmed its valuation on the shares from 272p to 265p. According to MarketBeat, Britain’s biggest supermarket currently boasts a consensus ‘buy’ rating and an average price target of 264.43p.

As of 08:10 GMT, Tuesday, 29 January, Tesco PLC share price is 223.20pp.

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