Deutsche Bank downgrades Sainsbury's to 'hold'

(Sharecast News) - Deutsche Bank downgraded Sainsbury's on Tuesday to 'hold' from 'buy' and cut the price target to 365p from 390p as it said there was less upside into peak trading. The bank said its previous 'buy' thesis centred on sustained grocery volume outperformance, scaling margin drivers and scope for the valuation discount to Tesco to narrow post Argos.

"Following H1 results we have less conviction on volume outperformance, while weaker sales leave greater reliance on margin and cost levers to deliver earnings," it said.

"The business remains in good shape: pricing is competitive, customer satisfaction healthy and availability strong at circa 98%. However, a softer volume outlook, limited near-term margin progression and a fuller valuation leave risk/reward less attractive into peak trading."

DB cut its H2 LFL growth forecast from 3.6% to 1.8%, while its FY27 EBIT estimate was unchanged at £1,052m.

At 1040 GMT, Sainsbury's shares were down 0.7% at 350.90p.