J Sainsbury PLC (LSE:SBRY) jumped 3.4% after Goldman Sachs (NYSE:GS) put the food retailer back on its 'buy' list.
Analyst Richard Edwards upgraded the FTSE 100-listed stock to ‘buy’ from ‘neutral’ and increased its share price target to 350p from 305p.
Edwards takes a constructive view of the sector expecting a rational UK food market given discounters are still inflating above the market and investing internationally and Asda/Morrisons continue to “donate” share.
He explained Sainsbury’s has strengthened its positioning through the year, with Goldman’s proprietary price analysis indicating that it has closed the price gap versus Aldi, becoming the second of the Big 4 to do so.
“Consequently, Sainsbury’s has seen strongly improving market share momentum, with recent market share gains outpacing Aldi,” he noted.
A focus on cost efficiency and retail cash flow over the pandemic period has allowed Sainsbury’s to deleverage significantly, which potentially provides the opportunity for greater cash return going forward, Edwards thinks.
All this leads Goldman to raise its second-half 2024 and first-half 2025 grocery sales growth estimates to 6.5% and 4% (from 5%/3% previously) and its mid-term retail sales growth assumptions to 2% from 1.5%.
It also increased 2024 and 2025 retail free cash flow forecasts by 3% and 4% to £626 million and £ 548 million respectively.