In a wide-ranging research note last week, analysts at Goldman Sachs initiated a Buy rating on shares of Tesco (LON: TSCO) and a Neutral rating on Sainsbury (LON: SBRY) while also upgrading Marks & Spencer (LON: MKS).

The investment bank noted the directional link between food sales and inflation, which is currently normalizing.

Tesco was assigned a 350p price target, with the firm stating that the supermarket giant’s Buy rating reflects its successful emphasis on value for customers and market share progress. Goldman Sachs analysts also pointed to its leading free cash flow margins relative to peers.

Marks & Spencer was lifted to Buy from Neutral, with a new price target of 330p, up from 255p. Analysts at the investment bank noted that MKS has seen the most substantial earnings revisions and the most significant share price outperformance within the firm’s coverage.

Sainsbury was given a 320p price target, with the firm noting the company’s encouraging market share gains but also commenting that its free cash flow margin is below its peers. In addition, Goldman Sachs said the disinflation-driven slowdown in UK grocery that they expect introduces risks to its forecasts.

By James Fyeman