Prediction: Tesco shares could soon climb another 17%

[ad_1]

Tesco (LSE: TSCO) shares rose 19% in 2025, up 48% over the past five years. And based on December analyst updates, we could soon see further gains. What’s more, solid earnings rises dominate the forecasts for the next three years. And the Tesco share price valuation doesn’t look stretching to me.

Citigroup is the most bullish recent forecaster, putting a 510p target on the Tesco share price. And that’s where the possibility of a 17% increase from the price at the time of writing comes from. But we have to temper it with Deutsche Bank‘s 500p target, though still a respectable 14% rise. And Jefferies sees very little change at 450p.

Long-term income

For me, Tesco looks like it could keep paying progressive dividends for many years. The dividend doesn’t provide a high yield, with a forecast 3.25%. And the supermarket business is a low-margin one. So Tesco might not be quite the cash cow that some of the bigger yielders are.

But keeping dividends growing over the long term often can help build up to better overall rewards than a headline high yield that’s less dependable. And forecasts suggest Tesco’s earnings should cover the anticipated dividends around two times.

Tesco commands a 28% share of the UK groceries market — surely the most vital in the economy. And that boosts my confidence in the long-term outlook for investors. I’ve always liked the suggestion that when we want to invest, consider going for the best in a sector first. In my judgment, that’s Tesco.

Average valuation

Saying that however, the valuation of Tesco shares and the dividend yield are very much average. We’re looking at a forward price-to-earnings (P/E) ratio of 16 for 2026, dropping to 14 on 2027 forecasts. That’s pretty much bang on the FTSE 100 long-term average. And the index’s dividend yield’s currently a bit over 3% too, with a long-term average that wavers around 3.5%.

Looking at the business itself, I like Tesco’s diversification in terms of product ranges and outlet types. At Tesco supermarkets we can shop for value products, alongside more upmarket Finest items. I buy both, with some of the value products being staples in my freezer.

I also like Tesco’s smaller high-street and inner-city stores, which are convenient to pop in when I’m walking around town.

My verdict

My own experience and tastes colour my take on Tesco as an investment, with other investors seeing things differently. And the only reason I haven’t bought Tesco shares is because I focus mostly on a high-yield investment strategy (with a bit more risk).

But I do think Tesco’s a top stock to consider, especially as a cornerstone for a new Stocks and Shares ISA in 2026. And despite the rise in Tesco shares, I still rate forecast valuations as reasonable.

The post Prediction: Tesco shares could soon climb another 17% appeared first on The Motley Fool UK.

More reading

• Are Tesco shares easy money heading into 2026?
• Here’s why I like Tesco shares, but won’t be buying any!
• Can the barnstorming Tesco share price do it all over again in 2026?
• Prediction: next Christmas, £5,000 invested in Tesco shares could be worth…
• £5,000 invested in Tesco shares 5 years ago is now worth this much…

Citigroup is an advertising partner of Motley Fool Money. Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

[ad_2]

Source link