Tesco (LON: TSCO) jumped 1.4% Monday after Jefferies lifted the stock to Buy from Hold.
Tesco closed the session at 259.9p, its highest level since August last year, adding to its gains this year which now stand at over 15%…
Even so, TSCO is still below its pandemic highs of above the 300p mark.
Jefferies told investors in a note Monday that they are readjusting the ratings of the UK general retailers sector, reflecting the ongoing sequential deflation in energy prices.
In addition, the firm, which also raised its price target on the stock to 310p from 260p, believes Tesco will benefit from the consistency of free cash delivery as it closes in on the anniversary of accelerating mix pressures.
“We are approaching the anniversary of the downtrade inflection in UK grocery,” the firm wrote. “Mix pressures in the market should start reducing a little, and Tesco’s focus on assortment optimisation should help optimise in-store mix dynamics.”
They added that Tesco reducing margin pressures in the second half 2022/23 should provide investors improving “confidence on free cash delivery.”
Tesco dropped the fourth place last month when it comes to the cheapest supermarket in the UK, behind Aldi, Lidl, and Sainsbury’s, according to Which. However, for four months prior, it sat in third.
Overall, three of five analysts have a Buy rating on the stock, with two at Hold, according to TipRanks. The average price target is 273.25p, representing a potential 5% upside from current levels.
By Sam Boughedda