UBS raises Tesco target price to 530p and calls it a port of calm amid market uncertainty Proactive uses images sourced from Shutterstock
UBS has lifted its target price for Tesco PLC (LSE:TSCO), the UK’s largest supermarket group, from 500p to 530p while reiterating a buy recommendation, arguing the retailer offers a rare combination of stability and growth at a time of heightened macroeconomic and geopolitical uncertainty.
The bank’s shares were trading at 472p when the note was published on Monday, leaving an implied upside of around 12% to the new target, with forecast total returns of around 16% including dividends.
UBS described Tesco as its top pick ahead of full-year results due on 16 April, and said the company was well placed to return to profit growth in the coming financial year after holding earnings steady through a period of significant cost inflation and price investment, including its response to competition from ASDA.
The bank forecasts group earnings before interest and tax of £3.1 billion for the current financial year, in line with company guidance, rising to £3.2 billion the following year on the back of 3% like-for-like sales growth in the UK.
UBS said proprietary consumer survey data from its Evidence Lab research unit showed Tesco had overtaken Aldi as the top-rated UK grocer on net promoter score (NPS), a measure of customer satisfaction and loyalty, for the first time since 2017.
The bank said Tesco’s pricing was now broadly on a par with ASDA, according to data from consumer group Which?, and that Tesco ranked first among all supermarkets for price attractiveness in UBS’s own survey.
UBS also drew a comparison with Walmart, the US retail giant, noting that Tesco’s recent re-rating to around 15 times forward earnings from 12 times in 2024 was justified and that Walmart’s more dramatic re-rating offered a template for further potential upside as Tesco pursues similar levers of market share gains and alternative profit streams.
In early afternoon trading, the shares were up 1.8% at 480.4p.