Financial Trading Blog
Stock of the day 10/11/2015 – J Sainsbury PLC
By the end of September Sainsbury’s aisles were looking increasingly sparse on the investor-front; the stock was hovering around a one-year nadir of £2.20 to £2.30 after following its struggling supermarket sector peers lower in the market chaos of August. However, that was all about to change with the company’s second quarter trading update on September 30th.
(Source: IT-Finance.com 10/11/2015)
Whilst CEO Mike Coupe confirmed that the supermarket landscape was ‘still challenging’ (something that equated to a 1.1% drop in like-for-like sales excluding fuel), the fact that Sainsbury’s upgraded its full year underlying profit guidance to ‘moderately ahead’ of the previously forecast £548 million sent investors wild for the stock. In the immediate aftermath Sainsbury’s jumped 13%, from £2.32 to £2.60. Since then its gains have continued, if somewhat more sporadically, hitting a 4 and a half month high of £2.80 at the start of November before falling to a current trading price of £2.70 (IT-Finance.com, 10/11/2015).
The challenge for Sainsbury’s now is to keep up the momentum it gained at the end of September, something that could be difficult with investors’ freshly heightened expectations. In terms of its post-half year results movement it will likely be dependent on what area investors focus on: underlying pre-tax profits are expecting to fall 24% to £284 million; statutory pre-tax profit of £308 million, on the other hand, would be a vast improvement on the £290 million loss incurred at this time last year. It remains to be seen whether investors will think such figures justify the dramatic jump Sainsbury’s saw back in September.
Sainsbury’s has a consensus rating of ‘Hold’ with an average target price of £2.49.
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