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Tesco share price: Shore Capital flags ‘pleasant surprise’

Shore Capital remains bullish on Tesco (LON:TSCO), flagging scope for ‘pleasant surprises’ as the blue-chip supermarket sets the scene for a special dividend, Citywire reports. The update comes ahead of the blue-chip grocer’s preliminary results due out on April 10.

Tesco’s share price fell in the previous session, giving up 1.92 percent to close at 219.20p, underperforming the broader UK market, with the benchmark FTSE 100 gaining 57.70 points to close 0.81 percent up at 7,190.84. This morning, the supermarket’s shares have climbed into positive territory, having added 0.41 percent to 220.10p as of 08:02 GMT, as compared with about a 0.36-percent gain in the Footsie.

ShoreCap remains bullish on Tesco

Shore Capital reaffirmed Tesco as a ‘buy’ yesterday, with the supermarket continuing to make progress in central Europe. Citywire quoted the broker’s analyst Clive Black as commenting that there are headwinds that may become tailwinds, including “neutralising the lag of general merchandising in-store in the UK after the closure of Tesco Direct,” simplifying relations in Thailand, and ‘potentially positioning Poland for disposal’.             

The analyst further pointed out that Shore Capital believes that “there is scope for pleasant surprises from the group for investors, particularly around free cashflow, that could compress dividend cover and set out a course for special distributions and/or a share buy-back”.

Other analysts on blue-chip supermarket

Morgan Stanley initiated coverage of Tesco at ‘overweight’ rating last week, without specifying a price target on the shares, while UBS, which rates the company as a ‘buy,’ boosted its price target on the shares from 300p to 305p. According to MarketBeat, Britain’s biggest supermarket currently has a consensus ‘buy’ rating and an average price target of 267.85p.

Earlier this week, the latest Kantar data showed that Tesco saw  its sales rise in Ireland in the 12 weeks to January 27, while customers remained flat.

As of 08:24 GMT, Thursday, 14 February, Tesco PLC share price is 219.20p.

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