Goldman Sachs Lifts Sainsbury's Rating on Argos Sale
Goldman Sachs has upgraded its rating on Sainsbury's from 'sell' to 'neutral', boosting its price target to 360 pence. This decision follows the company's announcement of selling Argos to Swift Partners, which removes a major concern for investors.
The analysts at Goldman Sachs had previously downgraded Sainsbury's due to concerns about Argos' performance under competitive pressure from Joybuy. However, the sale of Argos demonstrates the company's ability to execute strategic changes focused on food sales.
Sainsbury's will receive a minimum of £120 million from the transaction, although Goldman Sachs expects this amount to be offset by separation costs, making the deal cash neutral. The analysts also predict a neutral impact on underlying operating profit and low-single-digit earnings-per-share accretion due to income from commercial agreements with Swift Partners.
The price target implies around 0.8% upside from Sainsbury's current share price of 357 pence, which equates to 14 times Goldman Sachs' fiscal year 2028 earnings-per-share estimate of 25.78 pence. The broker has kept its forecasts unchanged for the company, projecting revenue and profit growth.