Tesco (LON: TSCO) shares have fallen 22% this year, but can the supermarket make a recovery?
On Friday, the leading UK supermarket chain was reinitiated with an equal-weight rating at Morgan Stanley, with analyst Izabel Dobreva assigning the stock a price target of 263p.
The analyst stated that food spending is generally resilient, but Tesco’s EBIT margins are not as high as top-line growth is “in a tug of a war against wage and energy pressures.”
Despite a challenging year for both Tesco and London-listed stocks, signs of a recovery are on the horizon. Tesco has gained over 14% since its lows in October, and its most recent interim results saw growth in its sales and revenue. The group even increased its interim dividend per share.
Furthermore, the company has been buying back its shares for much of this year and has extended its repurchase plan again, suggesting a vote of confidence by the board.
Like-for-like sales have remained resilient, suggesting the current impacts of soaring inflation and the cost-of-living crisis is yet to significantly affect the group’s results.
The next set of results for Tesco is expected in January, which will measure its trading in Q3 and through the integral Christmas period.
Ken Murphy, Chief Executive of Tesco, also commented on the current spending habits of consumers, stating it was “inevitable” that shoppers would spend less this Christmas.
As you can see, Tesco’s share price is not an ideal sight for investors. Nevertheless, its recent trends will be encouraging, although maintaining that trend in the long term is, of course, the key.