Equities Retail

Tesco share price: UBS lifts valuation ahead of results

UBS has lifted its target on the Tesco share price (LON:TSCO), arguing that the grocer has made significant headway against an inherently sceptical market, Proactive Investors reports. The comments come as Britain’s biggest grocer prepares to update investors on its first-quarter trading performance on Thursday.

Tesco’s share price has fallen into the red in today’s session, having given up 0.58 percent to 229.07p as of 14:30 BST. The stock is underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.58 percent higher at 7,418.09 points. The group’s shares have given up more than eight percent of their value over the past year, as compared with about a four-percent dip in the Footsie.

UBS lifts target on Tesco share price

UBS reaffirmed Tesco as a ‘buy’ today, while lifting its valuation on the shares from 305p to 315p. Proactive Investors quoted the analysts as commenting that consistent margin rebuild in the grocer’s UK business and like-for-like sales growth outperformance reflected ‘genuine reconnection’ with shoppers and ‘superior terms of trade’ resulting from ‘innovative approaches’ with suppliers.

“The fitness of the business has much improved, paving the way for the multiple mid-term growth opportunities in the offing,” the broker pointed out. UBS, however, cautioned that the market remained ‘inherently sceptical,’ with Tesco’s share price little changed year-on-year and consensus estimates for 2021 earnings per share of 19.8p still seven percent below management expectations.

Other analysts on blue-chip grocer

The 14 analysts offering 12-month price targets for Tesco 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 June 10, the consensus forecast amongst 22 polled investment analysts covering Britain’s biggest grocer has it the company will outperform the market.

Jefferies recently reaffirmed Tesco as a ‘buy,’ 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.

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