Hargreaves Lansdown reckons that while Tesco (LON:TSCO) is heading in the right direction, the market is still not pleased with the speed of improvements at the blue-chip supermarket, Citywire reports. The comments follow the grocer’s interims yesterday when the company’s profits fell short of analyst estimates despite rising 24.4 percent.
The results sent Tesco’s share price tumbling yesterday, with the shares giving up 8.59 percent to close at 215.00p, underperforming the blue-chip FTSE 100 index which added 35.73 points to end trading 0.48 percent higher at 7,510.28. The shares have been little changed this morning, having inched 0.02 percent higher to 215.03p as of 08:07 BST, as compared with a 0.23-percent dip in the Footsie.
HL weighs in on Tesco results
Citywire quoted Hargreaves Lansdown analyst Laith Khalaf as commenting yesterday that while Tesco’s revenues, profits and debt were all heading in the right direction, the grocer’s shares were “under pressure as margins aren’t moving forward as quickly as hoped”.
With margins rising, the target of between 3.5 percent and four percent by 2020 is ‘within touching distance’, he elaborated, noting that the market had expected “more improvement on this front, and that disappointment has fed through into the share price”.
“It’s been on a strong run of late though and is still up around 20 percent over the last year, so a correction reflects a bit of a reality check for the animal spirits on the market,” the analyst pointed out, adding that things were “getting better, just not quite as quick as stretched expectations would suggest”.
Other analysts on supermarket
JPMorgan Chase & Co reaffirmed Tesco as an ‘overweight’ yesterday, without specifying a price target on the shares. According to MarketBeat, Britain’s biggest grocer currently has a consensus ‘buy’ rating and an average price target of 267.07p.