Sainsbury’s gets double-downgraded by Berenberg ahead of full-year results
Analysts from Berenberg double-downgraded Sainsbury’s ahead of its full-year results on Thursday, while upgrading its UK-based rivals.
Analysts at Berenberg double-downgraded Sainsbury's from a ‘buy’ rating to ‘sell’ ahead its full-year results on Thursday 30 April.
The Hamburg-based investment bank also lowered its target price for the stock to 170p a share, implying a potential downside of -15% based on Sainsbury’s closing at 200p on Tuesday.
Despite downgrading its assessment of Sainsbury’s, analysts at Berenberg opted to lift Morrisons rating from ‘hold’ to ‘buy’ and raised its target price for the rival supermarket chain to 213p.
Morrisons closed at 188p on Tuesday.
‘While our analysis indicates that the grocers can achieve absolute profit growth at their retail businesses, and the UK grocers are best positioned through the business rates 'holiday', we expect them to mitigate these benefits as all the grocers in our coverage would face external pressures if they demonstrated exceptional profit growth,’ Berenberg said in a note to investors.
The discrepancy between Berenberg’s outlook for the two supermarkets is based on it expecting Sainsbury’s non-food retail and banking units dragging down its overall performance.
‘Their unsecured lending exposure will have to book significant loan losses and may require substantial capital injections in order to maintain sufficient liquidity,’ the bank said.
Morrisons is better placed than Sainsbury’s as a result, with it benefitting from increased food demand and its relatively strong balance sheet enabling it to maintain its dividend amid the Covid-19 crisis, Berenberg added.
Ocado remains preferred stock, says Berenberg
Online food delivery service provider, Ocado, remains the bank’s top rated stock in the sector, with more grocers in need of adopting automated online solutions in order to stop margin dilution occurring, according to its analysts.
‘In our view, Ocado is primed to capitalise on this and we expect it to secure more deals following the crisis,’ the bank said.
Berenberg also remains optimistic about buy-rated Tesco, with its adoption of automated online solutions key in helping it minimise margin dilution, while its wholesale business will likely be a key beneficiary of sector consolidation and offers it significant scope for capital returns.
How to trade stocks with IG
Looking to trade Sainsbury's and other stocks? Open a live or demo account with IG and buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:
Create an IG trading account or log in to your existing account
Enter ‘GBP/USD’ in the search bar and select it
Choose your position size
Click on ‘buy’ or ‘sell’ in the deal ticket
Confirm the trade
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
