The bank’s analysts also raised their target price for the stock to 72p from 70p, but in morning trade Bakkavor shares were still 1.4% lower at 65p.
In a note to clients, the Barclays analysts said: “We were UW Bakkavor for two key reasons: 1) Concerns that growth in its UK business could be weaker for longer, i.e. expected a high single-digit decline in H2 (now -5%), following a >15% decline in April/May, and 2) Margin risk from incremental COVID-19 related costs and labour costs.”
But, they pointed out that the group’s interim results reported earlier this week changed their view on both fronts.
The analysts noted that “there is evidence that the recovery in UK fresh food is coming through faster than we had anticipated and margins are also more resilient, driven by overhead reductions and restructuring benefits.”