Berenberg slightly raises target price on Sainsbury's following Q3 results

Analysts at Berenberg slightly raised their target price on grocery giant J Sainsbury from 275.0p to 285.0p on Monday following the group's third-quarter results.

Berenberg stated Sainsbury's third-quarter numbers revealed that stronger-than-expected grocery demand had driven a profit guidance upgrade, offsetting demand weakness at Argos.

The German bank noted that moving into 2022, inflationary pressures looked set to increase, but added it expects grocery demand to remain "resilient".

Moreover, Berenberg believes Sainsbury's will be able to mitigate cost pressures via supplier negotiations, self-help opportunities and operational efficiencies.

"We believe management's navigation of the risks from the pandemic and profit delivery track record provides confidence on executing its medium-term targets," said Berenberg.

However, despite the modest increase to their price target, the analysts highlighted that with shares up by more than 40% from pre-Covid-19 pandemic levels, they believe the risk/reward for Sainsbury's shares has already priced in.