Deutsche cuts Morrisons to 'sell'

21st May 2014 10:35

Deutsche Bank has advised investors to sell shares in Morrisons, saying a rise in the British supermarket group's shares was unwarranted and a 275p takeover bid was unlikely.Deutsche said it was downgrading the stock to a 'sell' with a price target of 190p, down from 200p.Morrisons' share price has rallied 10% in the last fortnight, outperforming rivals Tesco and Sainsbury's, Deutsche noted.But the broker said there had been no news to support the rise and the underlying value of the stock also failed to back this up.It highlighted sales falls in the last three months, which came before the supermarket launched a new price-cutting drive at the start of May.The broker said: "Typically, it takes at least six months before the impact of price initiatives are reflected in volumes and in the meantime, price cuts should negatively impact value growth."As such, we expect no improvement in Morrisons' sales trend in the coming months."Deutsche also pointed to speculation on financial website thisismoney.co.uk on May 15th about a potential takeover bid at 275p per share, which it said would be likely to depend on two "unlikely" scenarios including a sale of a material chunk of Morrisons' property assets or a material rise in profits.Shares in Morrisons fell 4.7p or 2.2% to 204.8p at 11:00 in London.PW