Wm Morrison shoots higher on UBS upgrade

Shares in supermarket retailer Wm Morrison shot higher after UBS upgraded the stock to ‘neutral from ‘sell’ and lifted the price target to 175p from165p.

The bank noted that new chief executive officer David Potts has only been in the business about six months, but already perceptions have improved.

UBS said its ‘Evidence Lab’ UK consumer survey suggests Morrison has made good progress across the last six months, with consumers recognising an improvement in 'value for money' and fresh credentials.

“Our survey still suggests that Morrison needs to better differentiate itself and the fix likely means that consensus numbers are too high. But the shares look to be pricing consensus downgrades already and we raise our rating to neutral from sell,” it said.

More generally, UBS said Morrison should benefit from an improved outlook for the industry, noting a recovered consumer, less new space and discounters’ market share gains normalising.

“We're still toward the lower end of consensus and we think the short-term trajectory of earnings is likely to be negative so it looks too premature to buy the shares,” it added.

At 0900 BST, Morrison shares were up 5.1% at 171.37p.