Tesco Shares Dip (LON:TSCO) – Price Target Raised As Rating Downgraded

Tesco shares (LON:TSCO) are pulling back this morning, down 0.84% today following a mixed view from Wall St, against some bearish market sentiment regarding the UK retail sector. The share price reaction comes despite some firms raising their price targets, highlighting the complexities facing the supermarket giant.

While JPMorgan increased its price target to GBX 500 from GBX 450, maintaining an ‘Overweight' rating, Jefferies downgraded Tesco from ‘Buy' to ‘Hold'. The split on Wall St underscores the differing perspectives on Tesco's near-term potential. 

Jefferies' downgrade is attributed to the stock's significant re-rating year-to-date, up 17.28%, coupled with concerns about a “muted” UK retail spending environment. The firm expressed caution, noting a disconnect between market optimism and consumer confidence. This perspective suggests that the market's positive outlook on Tesco may not be fully supported by underlying economic realities.

Looking back at earlier shifts from the analyst community, and we find Bernstein analysts reaffirmed an ‘Outperform' rating on Tesco, setting a price target of GBP 4.30. Their analysis emphasizes Tesco's robust position in the UK food retail sector, noting its strong profit pool relative to market share. Bernstein points to Tesco's competitive pricing, market scale, and innovations in private label products and loyalty programs as key strengths, supporting their optimistic outlook.

Citi analysts also maintained a ‘Buy' rating with a GBP 4.25 price target, anticipating continued strong performance in Tesco's core UK business, even with minor adjustments due to challenges in the Booker and Central and Eastern Europe regions. They project a 4.1% growth in fourth-quarter like-for-like retail sales.

Recent data indicates that Tesco's sales rose by 5.9% in the 12 weeks leading up to November 2, increasing its market share to 28.2% from 27.7% the previous year. This growth is attributed to competitive pricing, effective loyalty schemes, and a diverse product range appealing to price-conscious consumers. The easing of grocery price inflation to 4.7% has also contributed to this positive trend.

However, earlier in the year, Asda's price cuts, aimed at regaining market share, sparked fears of a potential price war among UK supermarkets, leading to a decline in Tesco's share price as investors anticipated potential profit margin pressures.

Heading into the festive season, bulls will be looking for the support level around 437.50p to hold, in order to reignite the momentum that had built earlier in the year. Looking at Tesco's share price action compared to the FTSE 100 shows them making a similar route through 2025, whilst today's price action has them making opposite moves. Gains are almost identical on the year, but will the share price break from this pattern into 2026?