It has been a long time coming, but finally there is a fan out there for Tesco (LON:TSCO), which updates on trading next Thursday.
Bad news has crushed the share price as it has been hit by competition, hobbled by leaden footed management and bogged down an accounting scandal. And then there’s the rigmarole of having to offload various parts of its vast empire to reduce its debt pile.
Down from 42% from its 2015 peak, Tesco has fallen so far it is finally in buy territory, according the well-respected retail team at Barclays.
Barclays moved to ‘overweight’ from ‘equalweight’ with a sum-of-the-parts valuation of 190p (down from 225p).
The stock responded in kind, rising 5% to 146p to lead the FTSE 100.
“We think recent share price underperformance has left Tesco's valuation at attractive levels, although we remain conscious of the numerous headwinds facing the UK food retail market,” the bank told its investors.
The woes of the discount retail sector were amply illustrated Thursday with profits warning from Poundland (LON:PLND), which was subject to a round of downgrades as competition at this end of the High Street intensified.
In fact Friday saw a dribble more with Exane BNP Paribas bringing up the rear with its cut to ‘neutral’ from ‘outperform’ on the stock.
If Poundland was taking a pounding – it has fallen50% in the past year – the rerating of one its rivals has gone far enough, according to Investec.
For B&M (LON:BME), off almost a quarter in the last six months, remains on the broker’s ‘buy’ list, albeit the price target has been trimmed down a little to 370p.
Adopting a similar thesis to his colleagues at Barclays, Alastair Davies reckoned the correction had been “too aggressive” and the market seemed to agree with him as it marked the shares 5% higher to 263p.
Oddly for a Friday (and the first Friday back after the break) there were a few nuggty upgrades and downgrades to get one’s teeth into.
Bank of America Merrill Lynch seemed to get the most traction as it turned positive of the chemicals firm Elementis (LON:ELM) – ‘neutral’ to ‘buy’ – and metal basher GKN (LON:GKN) – ‘underperform’ to ‘buy’.
The latter rose 5%, while the former moved ahead 4% in a busy opening session of trade.
Flood-hit RSA (LON:RSA) Insurance enjoyed a rare day in the sun as it edged up 1% on the back of move to ‘buy’ from ‘neutral’ by the London team of Japanese house Nomura.
Barclays again was active, this time with the red pen, as it cut its valuation for shares in the software firm Aveva (LON:AVV) to 1,530p from 2,220p, while Berenberg moved its price target to 1,800p from 2,450p.
Finally, JP Morgan Cazenove was busy as it cut price targets for a raft of mid-tier oilers – including Genel (LON:GENL), Tullow (LON:TLW), Cairn (LON:CNE), Premier (LON:CNE) and Soco (LON:SOCO) – to amend for the tumbling price of a barrel of crude.