Broker snap: Tesco rises after UBS upgrade

4th Oct 2011 09:28

Shares in Tesco bucked the downward trend on Tuesday after UBS upgraded the supermarket titan from neutral to buy and added the stock to its 'Key Calls' list, highlighting that "driving higher returns is now at the heart of group strategy."UBS says that Tesco management is now intensely focused on increasing levels of capital efficiency across the business. "As early actions become more evident over the coming 12 months, we believe this theme will become central to the investment case," the broker said.According to the broker, the challenging conditions seen in 2011 for the UK grocery industry may not be repeated next year, as VAT and fuel headwinds are annualised, driving a healthier like-for-like sales growth from the core business in 2012."A range of earnings, asset and dividend valuation models suggest Tesco shares represent a material pricing anomaly at the current level."The target price is hiked from 410p to 510p.Tesco was among the few stocks on the FTSE 100 making gains on Tuesday morning, rising 1.46% to 375.90p by 09:28.BC