Sainsbury’s share price: Analysts weigh in on CMA decision

Fidelity argues that J Sainsbury (LON:SBRY) needs to deliver a plan to rebuild sales and profits, Citywire reports. The comments came after the Competition and Markets Authority (CMA) rejected the group’s proposed tie-up with Walmart’s Asda which would have created Britain’s biggest supermarket, surpassing current market leader Tesco (LON:TSCO).

Sainsbury’s share price tumbled in the previous session following the watchdog’s decision, giving up 4.68 percent to close at 216.00p. The shares weighed on the benchmark FTSE 100 index which ended trading 0.50 percent lower at 7,434.13. The stock has extended losses in early morning trade this Friday, having shed 0.48 percent to 214.97p as of 08:01 BST, as compared with a 0.11-percent fall in the Footsie.

Sainsbury needs a plan

Citywire quoted Fidelity analyst Tom Stevenson as commenting yesterday that Sainsbury’s would “need to deliver a convincing plan to rebuild sales and profits if it is to avoid further weakness in its battered shares, although these have already largely priced in the decision by the CMA”.

The analyst reckons that Sainsbury’s “is the sector’s laggard, struggling to keep up with recovering Tesco and the discounters Aldi and Lidl”.

“The wait for better times is eased by a decent forecast dividend income but better times may be some way off,” the analyst concluded.

Other analysts on grocer

George Salmon at Hargreaves Lansdown meanwhile commented that the CMA’s decision had not “come as a huge surprise,” with Sainsbury’s and the watchdog “haven't exactly seen eye to eye since this process began”.

“The problem is a lot of hope was pinned on the deal going ahead. Somewhat embarrassingly for Sainsbury, it now needs to go back to the drawing board,” Salmon pointed out, adding, however, that there were also ‘bright spots on the horizon,’ with Sainsbury’s still expecting to realise £200 million of cost savings this year.

According to MarketBeat, the blue-chip grocer currently has an average ‘hold’ rating, while the consensus target for Sainsbury’s share price stands at 267.36p.