Analysts at Citi have lifted their rating on Wm Morrison Supermarkets (LON:MRW), arguing that the company could benefit from the merger of rivals Sainsbury’s (LON:SBRY) and Asda, WebFG News reports. The comments come with the Competition and Markets Authority (CMA) currently probing the tie-up which is set to create the country’s biggest grocer, surpassing current market leader Tesco (LON:TSCO).
Morrisons’ share price rose as investors welcomed the comments, adding 1.92 percent to close at 239.35p, and outperforming the benchmark FTSE 100 index which ended trading 0.20 percent higher at 7,034.13 points. The group’s shares have added more than 10 percent to their value over the past year, as compared with about a 5.5-percent fall in the Footsie.
Citi upbeat on Morrisons
Citi lifted its rating on Morrisons to ‘neutral’ yesterday, and hiked its price target on the stock from 210p to 255p. WebFG News reported that the analysts’ ‘base case’ forecasts the ‘Sasda’ merger to drive almost 60 percent pro-forma earnings per share accretion for Sainsbury’s, but synergies are expected to be ‘tempered’ by a predicted remedy process from the competition regulator of around 200 store disposals.
This, however, provides a potential opportunity for both Morrisons and Tesco to acquire stores, with Morrisons “benefiting from more opportunity and from a lower base”.
“While we view Sainsbury’s shares as offering the best risk/reward from the potential merger, we recognize the benefit which might also accrue to Morrison’s,” the broker pointed out.
Other analysts on grocer
The 13 analysts offering 12-month price targets for Morrisons have a median target of 250.00p on the shares, with a high estimate of 290.00p and a low estimate of 195.00p. As of February 4, the consensus forecast amongst 19 polled investment analysts covering the blue-chip group advises investors to hold their position in the company.
Tsveta van Son is part of Invezz’s journalist team. She has a BA degree in European Studies and a MA degree in Nordic Studies from Sofia University and has also attended the University of Iceland. While she covers a variety of investment news, she is particularly interested in developments in the field of renewable energy.