Time to put it in the trading basket?

With humble beginnings dating back to 1919, Tesco (TSCO) began as a one-stop market stall in Hackney, London, run by Jack Cohen. It has since grown into one of the leading multinational retailers and as of February 2022 had a market capitalization of $30.49bn (£22.4bn). The company is predominant in the UK, but has also expanded into Central European and Asian markets.

While Tesco’s core product portfolio remains food and drink, since the 1960s it has diversified its product offerings into clothing, home appliances and financial services. Moreover, Tesco’s share value is indicative of its portfolio of brands such as F&F, Jack’s (a discount chain named after the founder), Booker and Makro.

With nearly 5,000 stores worldwide and serving a customer base of 80 million people, Tesco is one of the most popular supermarket chains. In the UK, in the fourth quarter of 2021, Tesco ranked fourth in an online popularity survey. In January 2022, according to Statista, Tesco had the highest grocery market share in Britain at 27.9%.

Even grappling with global supply chain issues and uncertain markets due to the novel coronavirus, Tesco fared quite well last year. In 2021, its share price increased by almost 22.32%, from 237p on January 4, 2021 to a closing price of 289.90p on December 31, 2021.

However, in the latest Tesco share price news, Chairman John Allan said the worst in food prices was yet to come. With inflation expected to reach 7% by April 2022 according to the Governor of the Bank of England, food prices are also expected to rise. In a highly competitive pricing game in the retail sector, what is the outlook for Tesco’s share price? As Tesco navigates the current markets, join us as we dive deeper into its financial data and breaking news, and sketch out a plausible forecast for Tesco’s share price.

Commercial results for the third quarter of 2021 and the Christmas season

In its press release dated January 13, 2022, Tesco announced its financial results for the 19 weeks ending January 8, 2022. On an annual basis, there was an overall increase of 2.6% in retail sales of the ‘business.

Tesco’s offline convenience stores performed strongly and the company’s online sales also improved significantly. In its trade update, Tesco said its current online sales of almost 1.2 million orders per week were the highest since the start of the pandemic.

To keep pace with the growth of online orders, Tesco’s super-fast home delivery service, Tesco Whoosh, is now available in more than 100 stores. Continuing with its expansion plans, pending the approval of the Competition and Consumer Protection Commission (CCPC), the company announced its intention to acquire 10 Joyce supermarkets in Galway.

The top line of the retail and catering fronts of Tesco subsidiary and grocery wholesaler Booker is said to be ahead of pre-Covid levels. Despite Omicron’s impact during the holiday season, thanks to its strong market presence, retail sales continued to grow thanks to brands such as Londis, Budgens and Premier.

The banking arm of this retail giant, Tesco Bank, reported a drop of nearly 6% in sales. Due to lower revenues due to lower unsecured loan balances, the bank’s earnings appear to have suffered. However, on May 4, 2021, Tesco completed its takeover of Ageas’ 50.1% stake in Tesco Underwriting. Combining the results of Tesco Underwriting with those of Tesco Bank, overall sales appear to have increased by 33.6%.

Due to Tesco’s strong performance in retail, the company raised its operating profit forecast to £2.6bn from £2.5bn previously. Due to favorable economic forecasts on its provisions for expected credit losses, it also expects Tesco Bank’s operating profit to be between £160m and £200m.

Gloating over Tesco’s performance, Ken Murphy, CEO, said:

“Despite growing cost pressures and supply chain challenges in the industry, we have continued to invest to protect availability, doubled down on our commitment to delivering great value, and delivered our strongest festive range ever. This put us in a strong position to meet customer needs as, once again, Covid-19 led to a greater focus on celebrating at home. As a result, we outperformed the market, by increasing our market share and strengthening our value position.”

Inflationary pressures and recent movements in stock prices

5-Year TSCO Stock Price Chart

At the time of writing on February 21, 2022, TSCO stock stood at 294.60p. Compared to its closing price of 300p, as of February 1, 2022, the stock has fallen by 1.79%. The company is struggling with ongoing supply chain issues and inflationary pressures.

With inflation at an all-time high, food prices – the company’s staple supply – are also rising. However, the company has positioned itself to offer good value for money across its various offerings. In its third quarter and Christmas season trade update, Tesco clarified that more than 95% of its promotional sales are deployed on Clubcard prices.

The Tesco Clubcard is a loyalty card for its regular customers which is instrumental in obtaining discounted purchases. In January 2022, almost 8.5 million Tesco customers access Clubcard via its mobile application.

Tesco’s clean energy distribution channels

In order to make sustainable business choices and reduce its carbon emissions, Tesco has partnered with FSEW. Tesco plans to transport its product offerings to the UK by two 37-tonne DAF electric vehicles, developed by FSEW.

This initiative, as announced in Tesco’s press release of December 29, 2021, would replace approximately 65,000 kilometers of diesel-powered road with clean green energy and eliminate 87.4 tonnes of CO2e per year.

Sharing price predictions and analyst views

At least nine analyst forecasts, as compiled by TipRanks, have suggested a consensus future price for Tesco shares for the 12-month share price of 329.81p. As of February 21, 2022, all nine Wall Street analysts suggested buying Tesco shares.

Tesco’s predicted share price ranged from a 300p low to a 350p high. The average price target represented an upside change of 11.95% from the last trade price of 294.60p.

According to Wallet Investor’s algorithmic forecast as of February 21, 2022, the Tesco share price could reach a high of 353.872p by December 2025. Additionally, in its Tesco share forecast, it was mentioned that the price could also potentially be in the 317.789p to 323.773p range by December 2023.

Sharing a technical perspective on the analysis of Tesco shares, Milan Vaishnav, CMT, MSTA, Consulting Technical Analyst at Gemstone Equity Research & Advisory Services, said:

“After a good move from 240 to 304, the stock showed some signs of breathing. Few signs emerged that the 304 level could lead to the formation of a temporary top as the stock may take a break at the levels. The weekly MACD showed a negative crossover and is now bearish and remains below the signal line The Relative Strength Index (RSI) has broken below 70 from an overbought condition. The stock may see a corrective retracement from current levels and may test the immediate support zone of 280, possibly lower if that point is breached.Further sustainable upward movement will only occur above 305 levels.

When looking for recommendations to buy, sell or hold Tesco shares, it is important to keep in mind that analysts’ price forecasts and targets may be wrong. Analyst forecasts for Tesco stock are based on fundamental and technical studies of the stock’s performance. Past performance is not indicative of future results.

FAQs

According to the algorithm-based forecaster Wallet Investor, the TSCO stock price could rally and close at 309.342 by December 2022.

Note that the predictions may be wrong. Forecasts should not replace your own research. Always do your own due diligence before investing. And never invest or trade money you can’t afford to lose.

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