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 and spread bets in a few easy steps:
Create an IG trading account or log in to your existing account
Enter ‘Sainsbury’ in the search bar and select it
Choose your position size
Click on ‘buy’ or ‘sell’ in the deal ticket
Confirm the trade
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. 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. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Act on share opportunities today
Go long or short on thousands of international stocks with spread bets and CFDs.
- Get full exposure for a comparatively small deposit
- Trade on spreads from just 0.1%
- Get greater order book visibility with direct market access
See opportunity on a stock?
Try a risk-free trade in your demo account, and see whether you’re on to something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See opportunity on a stock?
Don’t miss your chance – upgrade to a live account to take advantage.
- Trade a huge range of popular stocks
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See opportunity on a stock?
Don’t miss your chance. Log in to take advantage while conditions prevail.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
