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On Tuesday, BNP Paribas (OTC:BNPQY) Exane adjusted its stance on J Sainsbury PLC (LON:SBRY:LN) (OTC: JSNSF), downgrading the stock from Outperform to Neutral. The firm set a price target for the shares at GBP2.55. The revision comes amid concerns about potential market shifts following recent industry developments.
Stifel analysts cited the recent announcement from competitor Asda as a catalyst for the reevaluation of J Sainsbury’s stock. The supermarket sector has seen some volatility, with Sainsbury’s shares declining by 6% since Asda’s disclosure. The analysts noted that while there is a bear case scenario where further downside of 20-30% could be seen, there is also a potential 50% upside if Asda’s issues prove to be systemic and Sainsbury’s along with Tesco (OTC:TSCDY) can capitalize on long-term market share gains.
The report highlighted the competitive dynamics in the UK grocery sector, emphasizing the potential impact of Asda’s announcement on the industry. The analysts suggest that if Asda fails to recover volume and pricing improves, this could benefit Sainsbury’s and Tesco in the long term.
BNP Paribas Exane’s updated outlook reflects a more cautious view of Sainsbury’s market position relative to its competitor Tesco, which the firm prefers and maintains at an Outperform rating. The analysts believe Tesco presents a more favorable risk/reward balance and more upside potential in their base case scenario.
This rating change for J Sainsbury PLC is significant in light of the competitive pressures within the UK grocery market. The firm’s revised price target of GBP2.55 for Sainsbury’s shares will be closely watched by investors as they assess the shifting landscape of the retail sector.
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