Tesco share price forecast: why rapid sales growth is starting to cool
Tesco’s share price forecast looks resilient despite COVID-19 year-on-year figures
The Tesco share price forecast was boosted by coronavirus lockdowns. Britain’s biggest retailer endured some teething problems in the pandemic’s early days, with shelves cleared of toilet paper and online delivery slots hard to find. But lockdown restrictions contributed to a dramatic surge in sales. Unable to dine in restaurants, consumers opted to splash out on expensive items and upped expenditure on food.
Inevitably, the Tesco stock forecast was going to look a little more turbulent when the hospitality sector reopened in April. Analysts’ fears that the supermarket chain would suffer some tough year-on-year comparisons in the first quarter have proved right.
Sales increased by 0.5 per cent compared with the first quarter of 2020, hitting £10bn. Tesco (TSCO) is keen for recent performance to be judged against the same period in 2019, which shows like-for-like sales up 9.3%.
Chief executive Ken Murphy said:
“We delivered a strong performance in the first quarter, even as we lapped the high demand of last year due to the pandemic.”
“While the market outlook remains uncertain, I’m pleased with the strong start we’ve made to the year and continue to be excited about the many opportunities we have to create value over the longer term.”
Tesco share forecast: What’s in store?
Uncertainty is the watchword for the Tesco share forecast in 2021. However, initial signs suggest that consumer habits are slowly but surely reverting to patterns seen before Covid-19 struck. Basket sizes are dwindling as shoppers opt to make small but frequent trips to their local store, and for those who prefer to do a big shop, weekend shopping is back in vogue.
Some changes may linger long after the coronavirus pandemic is over. On a call with investors, Murphy revealed that home dining is more popular than in pre-pandemic days. The passion for baking in the throes of lockdown remains: sales of ingredients are about 20% higher than before Covid.
In the short term, there are set to be some bright spots for the Tesco share price. One to watch is the Euro 2020 championship. Sales of beer, wine and snacks have surged as friends and families get together to watch the football, and maybe splash out on a new TV. England’s continued presence in this long-awaited (and delayed) tournament could be crucial if the event is to have a pronounced impact on Tesco’s performance in the second quarter.
Tesco’s share price fell when Q1 results were unveiled. Although online sales have proven healthy of late, the retailer is waiting to see how the easing of lockdown restrictions affects demand.
Murphy told investors:
“When there’s a complete lifting of restrictions we think we’ll see another little step down and if foreign travel is permitted they’ll be another step down then.”
This could prove instrumental for Tesco’s stock price, especially considering some dire predictions for the future of bricks-and-mortar retailers. Online sales in the first quarter were 22 per cent higher than they were a year ago, but aggressive investment in capacity means that Tesco currently has the ability to process 200,000 more orders a week than it does at present.
Chief financial officer Imran Nawaz said the company’s assumption was that UK sales would be “a few per cent down on last year as life becomes more normal and restrictions ease.”
Another threat for the Tesco share price forecast are apps that allow shoppers to get their groceries delivered to their door in under an hour, facilitated by the likes of Deliveroo and Getir. Ocado has tentatively dipped a toe in the water through its Zoom service. Tesco offers “Whoosh – superfast home delivery” in around a dozen areas, with plans to expand the service.
TSCOl price history
|Nov 26, 2021||2.7835||-0.0095||-0.34%||2.7930||2.7990||2.7660|
|Nov 25, 2021||2.7995||-0.0065||-0.23%||2.8060||2.8160||2.7930|
|Nov 24, 2021||2.8060||0.0075||0.27%||2.7985||2.8105||2.7690|
|Nov 23, 2021||2.7995||-0.0020||-0.07%||2.8015||2.8095||2.7815|
|Nov 22, 2021||2.8025||0.0275||0.99%||2.7750||2.8095||2.7750|
|Nov 19, 2021||2.7745||-0.0060||-0.22%||2.7805||2.7985||2.7695|
|Nov 18, 2021||2.7805||0.0065||0.23%||2.7740||2.7955||2.7630|
|Nov 17, 2021||2.7740||-0.0380||-1.35%||2.8120||2.8120||2.7605|
|Nov 16, 2021||2.8125||-0.0355||-1.25%||2.8480||2.8550||2.7970|
|Nov 15, 2021||2.8485||0.0275||0.97%||2.8210||2.8550||2.8210|
|Nov 12, 2021||2.8405||0.0045||0.16%||2.8360||2.8480||2.8285|
|Nov 11, 2021||2.8310||-0.0040||-0.14%||2.8350||2.8435||2.8075|
|Nov 10, 2021||2.8340||0.0615||2.22%||2.7725||2.8390||2.7725|
|Nov 9, 2021||2.7730||0.0375||1.37%||2.7355||2.7790||2.7345|
|Nov 8, 2021||2.7520||0.0115||0.42%||2.7405||2.7555||2.7375|
|Nov 5, 2021||2.7505||0.0075||0.27%||2.7430||2.7865||2.7430|
|Nov 4, 2021||2.7540||0.0325||1.19%||2.7215||2.7640||2.7215|
|Nov 3, 2021||2.7345||0.0210||0.77%||2.7135||2.7345||2.7040|
|Nov 2, 2021||2.7135||0.0075||0.28%||2.7060||2.7255||2.7060|
|Nov 1, 2021||2.7065||0.0175||0.65%||2.6890||2.7175||2.6890|
Tesco has close to 9.8 billion shares in circulation, and a market cap of £22.1bn, at the time of writing.
Despite current uncertainty, analysts are overwhelmingly bullish about Tesco’s prospects for the coming 12 months.
According to the Financial Times, 14 analysts offering 12-month price targets for Tesco have a median target of 297.50, with a high estimate of 399.00 and a low estimate of 220.00. This median forecast represents a 33.2% increase from the last price of 223.35.
According to the FT, the latest analyst recommendations are as follows: there are three Buy ratings in place, while 11 analysts believe that TSCO will outperform the market in the coming 12 months. Two analysts recommend holding onto the stock, and one says it will underperform the market. There are currently no sell ratings.
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