There is the capacity to incur significant losses investing in the UK’s three grocery stocks, according to the London arm of a Wall Street bank.
The highly rated retail team at Goldman Sachs has ‘sell’ recommendations on Tesco PLC (LON:TSCO), Wm Morrison Supermarkets PLC (LON:MRW) and Sainsbury PLC (LON:SBRY).
The potential ‘downside’ of buying stock in the respective companies is 31%, 21% and 20%, based on the price targets generated by the house’s number crunchers.
In a note to clients, the bank said that while valuations are inflating, input cost pressures are also “escalating”.
“With Tesco and Morrisons valuations now implying material margin recovery, we believe this margin risk is not appropriately reflected in stock prices,” Goldman told clients.
It is interesting that American giant’s take on the three listed UK grocery stocks appears to chime with the general scepticism across the Square Mile.
According to the Broker Forecasts site, only two of the 12 analysts polled is a buyer of Sainsbury, the figure is three out 15 for Tesco and one in 11 for Morrisons.