Tesco PLC (LSE:TSCO) turnaround story is no longer a secret, but investors might still be underestimating just how much further the supermarket giant can go.
Analysts at JPMorgan have dusted off their shopping list and put Tesco back on Positive Catalyst Watch, their way of flagging potential near-term upside.
Their revised price target is 450p, up from a previous 420p, and they continue to rate the shares “overweight”. With the stock currently trading well below that level, it suggests there’s plenty of value yet to be realised.
The broker’s case rests on three core themes: rational competition, generous capital returns, and a valuation that still looks too cheap relative to its earnings power.
Let’s unpack that.
First, the UK grocery market remains relatively disciplined. Despite fears of intensifying price wars, especially from discounters and a revived Asda under new ownership, JPM sees no signs of that materialising.
The competitive landscape, they argue, “remains unchanged”.
Second, Tesco is rewarding shareholders. Its balance sheet is in robust health, and management has been returning cash via dividends and buybacks. That trend looks set to continue.
Third, and crucially, there’s earnings momentum. The American bank has lifted its estimates across the board: by 17% for the first half, 7% for full-year 2026, and 4% a year on average beyond that.
The bank now expects adjusted operating profit of £3.2 billion for the group, comfortably above the midpoint of Tesco’s own guidance (£2.7bn–£3bn).
Don’t expect the company to trumpet that outperformance just yet.
JPM's analysts reckon Tesco will want to preserve some headroom, rather than risk overpromising in case of any bumps in the road.
But with interim results due on 2 October, there’s a decent chance management might at least nudge guidance higher... and that, in turn, could give the shares a lift.