Tesco share price soars after Barclays upgrades to buy recommendation

 
Catherine Neilan
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Could this be the news Tesco has been waiting for? (Source: Getty)

Tesco's share price soared five per cent this morning after Barclays upgraded its rating on the stock to buy.

Barclays moved its weighting from equal weight to overweight, saying recent declines in its share price had now lowered the stock to attractive levels.

8 January 2016 @ 11:15amTesco (TSCO)

It also believes there are improvements to the troubled supermarket's fundamentals that will filter through in the coming months. In the last year, the company's share price has fallen more than 30 per cent, as the fall out from its profit black hole continues to rumble on.

"In particular, it now offers a reasonably visible double-digit free cash flow yield and is trading in-line with Sainsbury's on an EV/sales basis for the first time in many years," Barclays said.

However it noted that discounters were still a threat, and there could be additional pressures from covering the Living Wage, which comes into effect in April.

"There are no guarantees on any of these points but we tend to think the risk profile is tilted in Tesco's favour," the bank's analysts said.

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