Key Takeaways
- The Tesco share price has had a strong run in 2026, helped by better profits and a higher dividend.
- At current levels, the stock doesn’t look cheap, with analysts seeing limited upside.
- As the largest of the UK’s grocers, Tesco is expected to continue to price its products just below inflation amid continued expansion of its convenience store footprint.
With UK inflation expected to rise once more because of the Iran War, and the government reportedly crisis planning for food shortages, the spotlight turns back on to the nation’s highly competitive grocers. Food prices soared in the UK’s last inflation surge, putting supermarkets on the front line of the cost of living crisis. So what will happen this time around?
Topping the supermarket size list by sales is the UK’s largest supermarket retailer, Tesco TSCO. Its impressive business turnaround has seen its stock price rise by 121.7% in the last five years. Year to date, Tesco stock has climbed 11.7%, positioning it for its best annual gain since 2025, when it climbed just shy of 20%.
What’s Behind the Tesco Share Price Gain This Year?
Tesco’s recent full-year results for 2025/26 were strong, and cemented its position as the UK’s leading grocer, with market share at more than double that controlled by Sainsbury’s SBRY.
Tesco sales were up 4.3% to over £66.5 billion in 2025/26, while Pre-tax profits came in at £2.4 billion, an 8.5% increase. A dividend stalwart, Tesco’s dividend will now rise to 14.5 pence per share, a 5.8% uplift on the 13.7 pence it paid in 2024/25. Markets rewarded the company for all this, with shares up 2% on the day of the results.
Following that, Morningstar equity analyst Verushka Shetty raised her fair value estimate for no-moat Tesco to £4.95. This is still some way below the company’s all-time share price high of £6, which it reached way back in May 2007.
Should I Buy Tesco Stock Today?
Despite the uncertainty hanging over the UK economy, Morningstar’s Shetty expects Tesco to either maintain or increase its grocery market share in the business year 2026/27. She expects the company to continue to price its products slightly below inflation, making its offers and increased convenience store footprint attractive to cost-conscious shoppers.
That said, though Tesco may be Shetty’s preferred stock pick among UK grocers, there is broad uncertainty about Tesco’s annual operating profit guidance of between £3 billion and £3.3 billion for this fresh financial year. For now, Tesco stock is trading around its Morningstar fair value estimate, so shares aren’t exactly a bargain. Investors will have to wait and see whether the positive outlook for Tesco stock actually checks out. But we all face a waiting game to see just how much more expensive the weekly shop will become.
For Morningstar, I’m Ollie Smith.
