Tesco: analysts comment

published 3 October 2012

We've assembled the views of some leading analysts on the prospects for Tesco, along with their price targets.

Philip Dorgan at Panmure Gordon

"We are buyers of Tesco, with a target price of 440p, because we believe that its UK business is fixable and because we believe that management buys into the need for strategic change that will help to make the sector investable again."

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Nick Coulter at Nomura

"Tesco UK posted its first (incrementally) positive like-for-like for six quarters. Moreover, Tesco met its guidance for a circa 5.2% margin, and reaffirmed its target for a similar H2 margin. With inflation moderating, we view the data point as further evidence that Tesco's volume-led recovery is underway."

Hence his 'Buy' recommendation with a price target of 430p.

Kate Calvert at Seymour Pierce

"...given potential longer term growth, there is no visibility on where UK profitability will bottom and whether management actions will work in the medium term. In addition, too many of its overseas businesses face trading issues short term. We reiterate our reduce recommendation as we expect inflation to return which has proved not to be positive for volumes or margin given the maturity of the UK market." She has a 'Reduce' recommendation with a price target of 310p.

Andrew Kasoulis at Credit Suisse

"With consensus already drifting lower ahead of today, further downgrades should not be a surprise. But the scale of the slowdown in Europe and Korea is disappointing. Also, although Tesco has not formally revised its ROCE target (14.6% for 2014/15E), we think most analysts and investors will now consider it unachievable. On the plus side, improvement in the UK and more capital discipline are likely to be considered positive." He has a 'Neutral' rating with a price target of 370p.