Sainsbury’s share price is in the spotlight as speculation emerges that the company could become the next acquisition target. The shares ended the week at 271p, which was a few points below its highest level this year. They have jumped by more than 60% from the lowest level last year.
What happened. Last week, Morrison’s the fourth-biggest supermarket chain in the UK said that it rejected a 8.7 billion pound takeover from a US private equity firm. This pushed its stock significantly higher as investors predicted that the PE firm would place a higher bid for the company.
In an article in today’s Telegraph, Laura Onita said that Sainbury’s attractive market share and turnaround plans could make it a viable acquisition target. The company has already announced plans to layoff more than 3,000 jobs and close its loss-making outlets. The firm is now increasing its focus on food, lower prices, and home delivery. Her article quoted a MorningStar analyst who said:
“Of all the targets, Morrisons is the easiest to go for, but Sainsbury’s has been speculated [about] for a while. Tesco is too big. There is a possibility they may come in. The more you integrate Argos into the estate the more it makes sense.”
In addition to the ongoing turnaround and its market share, analysts point to the fact that the firm owns less stores than its rivals while most of its shops are freeholds. So, what next for the Sainsbury’s share price?
The daily chart below shows that the Sainsbury’s share price has recently been a strong upward trend. That has seen its shares rise above the important resistance at 262p, which was the highest level on January 27.
The stock is most notably supported by the 50-day exponential moving average (EMA), which is a bullish factor. Therefore, the shares will likely keep rising as bulls target the next key resistance at 300 GBX. However, a drop below 262p will invalidate this prediction.
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