Jefferies remains bullish on Tesco (LON:TSCO), arguing that the grocer’s first-quarter sales numbers and Capital Markets Day would confirm steady progress in the UK and the increasingly cash generative nature of the business, Sharecast reports. The comments mark a boost for Britain’s biggest supermarket after Deutsche Bank recently trimmed its target for Tesco’s share price, having lowered its estimates for pre-tax profit and revenue for fiscal years 2020-22.
Jefferies’ comments, however, have done little for Tesco’s share price this Monday, with the grocer’s shares changing hands 0.91 percent in the red as of 13:49 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently standing at 7,162.20 points, flat in percentage terms.
Jefferies bullish on Tesco
Jefferies reaffirmed Tesco as a ‘buy’ today, with a price target of 275p on the shares. The move comes ahead of the blue-chip grocer’s upcoming first-quarter results and Capital Markets Day.
Sharecast reported that the analysts were hopeful that the coming weeks would help refocus investors’ attention on the grocer’s fundamentals, following the distraction of the prolonged Brexit process, which had detracted from the positive momentum in the business. Their projections were for the company’s free cash flow to rise towards £1.8 billion by 20/21, with the rate of growth in earnings per share expected to have moderated to nine percent by then, following a ‘meatier’ 14 percent in 19/20.
Jefferies meanwhile expects first-quarter like-for-like sales growth of 0.6 percent at Tesco, while at the upcoming Capital Markets Day management is expected to discuss multiple sources of incremental efficiencies to grow the customer offering.
Other analysts on grocer
The 14 analysts offering 12-month targets for Tesco’s share price for the Financial Times have a median target of 280.00p, with a high estimate of 305.00p and a low estimate of 220.00p. As of May 31, the consensus forecast amongst 21 polled investment analysts covering the blue-chip grocer has it that the company will outperform the market.