Bernstein has cut its rating for Wm.Morrison Supermarkets PLC to ‘market-perform’ from ‘outperform’ citing valuation grounds and trading softness.
The US broker reduced its target price for the FTSE 100-listed food retailer to 240p from 280p, with the shares currently trading at 226.25p, down 0.2% on Wednesday’s close.
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In a note to clients, Bernstein’s analysts pointed out that although it believes Morrison’s is "a great income stock", they see a fairer balance between risks and opportunities.
They noted that without clarity or confidence on any step-up in the supermarket firm’s free cash flow (FCF) in 2020/2021, there is insufficient valuation upside to keep an ‘outperform’ rating on the stock.
The analysts also noted concerns that Morrison’s current trading is weaker than market leader Tesco PLC (LON:TSCO) and Wal-Mart Inc (NYSE:WMT) owned Asda – which is the fourth-biggest UK supermarket chain.