Jefferies lowers Sainsbury's to 'hold', remains 'upbeat' on UK food retailers
Sainsbury (J)
256.60p
16:40 25/04/24
Analysts at Jefferies downgraded supermarket giant Sainsbury's from 'buy' to 'hold' on Monday, stating that while they remained "upbeat" on UK grocers, there appeared to be better value elsewhere.
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Jefferies said positive forecast momentum and outsized initial Covid-19 concerns had helped Sainsbury's over 50% UK sector outperformance over the past nine months.
However, the analysts noted that the Argos-driven earnings upgrades had "largely run their course", with Sainsbury's now on an eight-year price-to-earnings "relative peak" and a 26% premium on a foreign currency basis.
"We remain upbeat on UK food retailers as we reflect on near trough valuations at a time of strong mid-term earnings visibility (with 22/23 benefitting from a full Covid costs recovery and profit pools rebuild), as encapsulated by peak real yields offered by Tesco/WM Morrison relative to 10yr Gilts," said Jefferies, which kept its 280.0p price target on the stock unchanged.