The bank said it finds it “harder to construct a bearish narrative” on the supermarket considering that relative market share trends have been showing clear improvement after a weak 2019.
Moreover, there is the prospect of much better second-half profits and cash generation, with the possibility of a dividend of around 15p in March 2021.
Supermarket sales have been picking up recently after UK coronavirus restrictions become tighter in more areas around the country.
Grocery sales swelled 9.4% during the 12 weeks to October 4, 2020, according to Kantar, with the most recent four weeks seeing growth of 10.6% compared to 8% in the preceding four-week period.
Morrisons continued to enjoy the strongest growth among its competitors, with sales rising 11.5% that helped lift its share 0.2 percentage points to 10.1%.
The chain’s last update was in September, when it posted an 8.7% jump in sales in the 26 weeks to August 2, however total revenue of £8.7bn was down 1.1%, significantly impacted by a near absence of fuel demand during the pandemic lockdown, which was said to be rebuilding.
The statutory profit before tax tumbled 28% to £145mln due to £155mln of direct costs during the half resulting from COVID-19, including extra payroll and bonuses, protection measures, extra waste and distribution, with food bank and other donations also included, meaning a net cost of £62mln thanks to a £93mln benefit from lower business rates.