Coles shares rise on Morgan Stanley upgrade
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The news: Coles shares rose in morning trade as almost all other ASX 50 companies dropped, after Morgan Stanley upgraded its rating on the supermarket giant.
The numbers: Coles shares were up 0.4% to $19.08 at midday AEDT as the ASX 200 index shed 1.5%.
Morgan Stanley upgraded its rating on Coles from 'equal-weight' to 'overweight' and lifted its price target from $18.40 to $21.70.
It also reiterated its 'overweight' rating on rival group Woolworths, but cut its price target from $34 to $33. Woolworths shares were last down 2% to $28.04.
The context: Morgan Stanley analysts said that while Woolworths is forecast to see a greater uplift in earnings margins between now and the end of the 2026 financial year, Coles has "meaningfully closed the margin gap" on its larger competitor.
Likewise, while Woolworths is gaining more revenue through its ecommerce channels, Coles is making better market share gains in this area, the analysts said.
Morgan Stanley also re-iterated its preference for the two supermarket groups over discretionary retailers JB Hi-Fi (-2.2%), Harvey Norman (-1.7%) and Super Retail Group (-1.9%), given their "relative valuation appeal" and FY26 earnings growth profile.
The source: Morgan Stanley research
