Goldman Sachs upgrades AB Foods to 'buy' on US move

29th May 2015 08:21

Goldman Sachs upgraded Associated British Foods to 'buy' from 'sell' and raised the price target to 3120p from 2755p, saying that the stock's 17% underperformance year-to-date offers an attractive entry point.It said that AB Foods has de-rated over 20% since December 2014 versus the consumer staples sector and versus European retail peers such as H&M, Inditex and Ted Baker.In addition, GS said that its analysis of the US market suggests that the launch of Primark, due in autumn this year, will be a success.Goldman said it expects the launch of the Primark store in Downtown Crossing, Boston, to provide a catalyst re-focusing investors on the long-term Primark growth story following near-term negative sentiment around sugar and dollar sourcing."We estimate the US Primark stores will add £720m to group earnings before interest and tax by 2020, and believe near-term concerns from weak sugar, and dollar sourcing for Primark, have been well flagged," said Goldman.GS estimates that Primark will grow at a rate of 20 new stores per annum in the US alongside continued rollout in Europe.