Tesco looks better value than rivals, Goldman reckons

Tesco shares outperformed on Wednesday as Goldman Sachs sang the grocer’s praises following the first quarter in a year where its sales have outshone all its Big Four rivals.

The performance of the market leader has been driven by volume growth, Goldman observed, with price investment started at the end of last summer “the key lead indicator of market share gains”.

Till roll data was published a day earlier by Kantar, showing Tesco enjoyed the strongest growth in the past 12 weeks, up 0.5%.

Kantar’s data suggests that this price investment has continued in 2019, Goldman’s analysts said in a note from Tuesday that was made more widely available on Wednesday, “pointing to continued market share outperformance over the coming months”.

On top of this, Tesco’s decision to keep milk prices down at the end of last year, “suggests consensus and profit guidance is well underpinned by internal plans... allowing Tesco to focus on sustaining top-line momentum”.

With Tesco shares trading at favourable valuations compared to Morrisons and Sainsbury’s, the analysts see “trading momentum and valuation as compelling” and reiterated their ‘buy’ rating, with an unchanged 12-month price target of 265p.