One blue-chip City broker was singing Sainsbury PLC’s (LON:SBRY) praises ahead of its interim results next Wednesday (November 9).
The investment arm of Deutsche Bank restated its ‘buy’ target and 280p a share price target.
One of the major talking points next week will be the outlook for food prices, with imported inflation on the rise due to the post-Brexit tumble of the pound.
This fall in the value of sterling was cited as the root cause of ‘Marmitegate’ at Tesco (LON:TSCO).
Retailers are unwilling to be strong-armed into raising the cost of a basket of groceries in a period of intense competition from discounters such as Aldi and Lidl, but are under pressure from suppliers to do just that.
Analysts will be on the look-out for just how the revival (or otherwise) of Asda is affecting the competition.
Sainsbury, with its bias towards London and the Home Counties, is seen as less vulnerable to an onslaught from the Leeds-based, Wal-Mart-owned giant.
Finally, there will undoubtedly be questions about Sainsbury’s recently-acquired Argos chain, with followers keen to assess how it is bedding in.
Niamh McSherry, of Deutsche, expects Sainsbury’s operating profit to have fallen by around 4% over the six-month period, but is a fan of the retailer and the stock.
“We rate Sainsbury’s Buy as we expect it to be least impacted from an Asda recovery and we see a strong long-term value creation story via the Argos acquisition,” she said.
Of the 11 analysts logged as following Sainsbury, only three are buyers of the stock. Five are sitting on the fence with ‘neutral’ recommendations, while three are outright ‘sellers’.
The consensus price target has come down to from 270p to 241p in the last six months.
This suggests the stocks is overvalued given it is currently changing hands for 255p (down 1.7%).