Broker snap: Wm Morrison overlooked, JPM says
JP Morgan has reiterated its 'overweight' rating on Wm Morrison and raised its price target by 20p to 340p, saying that the market is underestimating the supermarket operator's potential.
"It is perplexing: everyone can see from the data that Morrison has more operational momentum than peers and yet it is de-rated on a relative basis and currently trades at a c15% discount to Tesco," the broker said.
JPM estimates that a trading update on June 5 will show like-for-like growth of around 7% in the 16 weeks to May 20. It added that the supermarket may benefit from more cautious consumer spending.
"In terms of customer perception Morrison and Asda are, we think, seen as the most price competitive formats of the majors," it said.
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"Evidence that consumers are trading down today is not conclusive, but it might prove a positive theme for Morrison going forward."
Morrison may also benefit from a high proportion of its sales coming from food, JPM said.
"Only around 5% of Morrison's sales is discretionary non-food: not only do Tesco and Sainsbury have higher exposure currently, but non-food growth remains a cornerstone of their stories," the broker observed.
