Stock of the day 03/03/2016 – WM Morrison Supermarkets PLC

Following a dire 2015 that saw it exit the FTSE 100 (not for long, it turns out) Morrisons has come back with vengeance in the New Year; can its current run continue when it reveals its full year figures next Thursday?

After plunging all the way below £1.40 by the middle of December, its price having halved in 3 years, things weren’t looking too good for Morrisons, the most beleaguered of the Big Four. Yet after starting 2016 at £1.49 things soon began to pick up for the supermarket.

On January 12, whilst the rest of the market was suffering the effects of 2016’s early slide, Morrisons jumped nearly 10% after revealing its better than expected Christmas update. A meagre 0.2% rise in like-for-like sales may sound like nothing (especially since total sales fell 1.2%), but given that analysts were certain of a fall the news was taken as a minor miracle, with CEO David Potts clearly working some kind of magic in his first 9 months in the job.


(Source: IT-Finance.com 03/03/2016)

That took the stock near £1.70 for the first time since the start of last November; and whilst the market turmoil did end up pushing Morrisons back to £1.52 by the 20th January it soon resumed its climb, and by the 28th February the supermarket had risen all the way to £1.89, its best price since last May.

Yet things were about to get even better for the company. On the 29th February Morrisons revealed a new deal with Amazon to supply its Prime Now and Pantry services, the news sending the stock surging around 9% in the following few days to cross the £2 mark for the first time since mid-March 2015. Morrisons now sits at a current trading price of £2.05 (IT-Finance.com, 03/03/2016).

Understandably the news sent ripples throughout the sector; Tesco dropped over 2% in the immediate aftermath whilst Ocado, which has a 25 year deal to run Morrisons’ online delivery service, was the biggest victim, dropping 12% in 48 hours. Ocado had already been spooked by the appearance of Amazon Pantry; the fact that one of its main suppliers has now cozied up to the online giant only spells trouble for the company in the coming months.

With this recent rise enough to see the supermarket re-enter the FTSE 100 just 3 months after having left the pressure is now on Morrisons to deliver with its full year figures next Thursday. The company stated in January it expects underlying profit between £295million and £310 million, so just how accurate these estimates are will likely dictate sentiment around the stock.

WM Morrison Supermarkets PLC has a consensus rating of ‘Hold’ with an average target price of £1.77.