JP Morgan reassured after Tesco's Capital Markets Day, reiterates 'overweight'

19th Jun 2019 09:24

(Sharecast News) - Analysts at JP Morgan walked away from Tesco's Capital Markets Day "reassured", telling clients that it should at least suffice to underpin consensus estimates for the grocer's margins and free cash flow.Nevertheless, while the FTSE 100 resident provided detail on the multiple areas of opportunity, and the presentation overall was "comprehensive and well conducted", but it was not very specific on new targets, JP Morgan said.Even so, the investment bank opted to keep its estimates and 180.0p target price unchanged while reiterating their 'overweight' recommendation.JP Morgan also described Tesco's execution as "solid", explaining how given the low likelihood of structural change in the foreseeable future, the investment rationale was one of cost cutting and "sensible" capital allocation which would drive higher free cash flow.And on a price-to-earnings multiple of roughly 12 and sporting a free cash flow yield of 10%, the shares looked "cheap", JP Morgan said."There should be marginal buyers of the stock as we currently see the European and US investor base more out than in the name, with the UK investor base having headroom to increase positions and few other obvious interesting stories within retail at this moment."