Tesco share price: ShoreCap still bullish on grocer

Written by: Tsveta van Son
March 11, 2020

Shore Capital continues to see Tesco (LON:TSCO) as a ‘buy’ as a result of a “quantum of considerable solace,” Sharecast reports. The move comes ahead of the blue-chip grocer’s interims next month.

Tesco’s share price has fallen deep into the red in London this morning, having given up 1.12 percent to 221.70p as of 09:47 BST. The shares are underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.12 percent lower at 7,273.38 points.

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ShoreCap sees Tesco as ‘buy’

Shore Capital reaffirmed Tesco as a ‘buy’ yesterday without specifying a price target on the shares. The move follows the grocer’s Capital Markets Day in June when CEO Dave Lewis set out the company’s priorities around quantum sales growth and Sharecast reports that ShoreCap anticipates that “already robust solvency ratios” were set to further improve, and the visibility and sustainability of the group’s dividend should ‘positively develop,’ noting the guidance for two-times earnings per share cover by February next year.

“So, whilst a soggy summer in the UK is expected to have taken the oomph out of Tesco’s domestic same-store trade and so share price momentum, we seek to look through the short-term curve to a more rewarding longer-term story,” the analysts pointed out, as quoted by the newswire, adding, however, that they “cannot deny total uncertainty at the time of writing as to what, if any, waves may ripple for the group’s earnings around the UK’s exit from the EU”.

Mortgage portfolio sale

In a separate development, Tesco Bank inked a deal to sell its residential mortgage portfolio to Lloyds (LON:LLOY).

“Our focus is on how we best serve Tesco customers and align our resources effectively to their needs while ensuring that our offer remains sustainable in the long term,”  Gerry Mallon, Tesco Bank Chief Executive, commented in a statement. “As a result, we made the decision to move away from our mortgage offering.”

According to MarketBeat, the blue-chip grocer currently has a consensus ‘buy’ rating, while the average target on the Tesco share price stands at 278p.