Tesco’s Resilient Market Position and Strategic Pricing Justify Buy Rating

Tesco plc (TSCO – Research Report), the Consumer Defensive sector company, was revisited by a Wall Street analyst today. Analyst William Woods from Bernstein maintained a Buy rating on the stock and has a p430.00 price target.

William Woods has given his Buy rating due to a combination of factors that highlight Tesco’s strong market position despite competitive pressures. One of the key reasons is the recent price adjustments by ASDA, which, although making ASDA more competitive, have not significantly undercut Tesco’s pricing. ASDA’s rollback primarily affects non-core branded items, leaving Tesco’s core offerings and private labels less impacted. This suggests that Tesco’s strategic pricing initiatives, like the Aldi Price Match and Clubcard Prices, continue to provide a competitive edge.
Furthermore, William Woods notes that the perception of price competitiveness is more crucial than the actual price differences, indicating that Tesco’s brand strength and customer loyalty remain intact. The analyst also supports his Buy rating with a target price of £4.30, derived from a balanced consideration of various valuation metrics, including PE, EV/EBITDA, and FCF yield. These factors collectively suggest that Tesco is well-positioned to maintain its market leadership and deliver value to shareholders.

According to TipRanks, Woods is ranked #1925 out of 9386 analysts.

In another report released on March 21, HSBC also maintained a Buy rating on the stock with a £4.30 price target.