Sainsbury’s share price: Jefferies flags bad news from CMA

on Apr 15, 2019
Updated: Mar 11, 2020

Jefferies reckons that J Sainsbury (LON:SBRY) is unlikely to receive the go-ahead from the Competition and Markets Authority (CMA) over its proposed tie-up with Asda, Proactive Investors reports. The comments come with the watchdog due to rule on the deal by April 30.

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Sainsbury’s share price has been subdued in London in today’s session, having inched 0.38 percent lower to 234.10p as of 14:24 BST. The stock is underperforming the benchmark FTSE 100 index which is currently 0.03 percent lower at 7,434.67 points. The group’s shares have lost a little mover than eight percent of their value over the past year, as compared with about a 2.4-percent gain in the Footsie.

Jefferies flags bad news from CMA

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Jefferies reaffirmed the FTSE 100 grocer as a ‘hold’ today, maintaining Sainsbury’s share price target at 230p, as the CMA prepares to rule on the supermarket’s merger with Asda. The ruling, due out by the end of the month, will come after the watchdog flagged significant competition concerns over the tie-up, prompting the companies to offer to sell up 150 stores, and to vow to deliver £1 billion of lower prices annually by the third year following the completion of their merger.

“In reality, we struggle to assume anything beyond a 20-percent chance of a drastic rethink by the CMA,” the broker pointed out, as quoted by Proactive Investors.

Analysts weigh in on upcoming results

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With the focus CMA’s decision, Jefferies reckons that Sainsbury’s financial results, due on May 1, will prove ‘largely inconsequential’. The broker expects the grocer’s fourth-quarter like-for-like sales at to have dropped 1.5 percent, following a 1.1-percent fall in the third quarter, including a 0.4-percent dilution from Mother’s Day falling into the new financial year. Jefferies, however, nevertheless expects profits to meet consensus forecasts of £626 million, Proactive Investors reports.

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