Tesco (LSE:TSCO) shares have quietly delivered a pretty rock-solid performance over the past year. The FTSE 100 retailer is up 20.9% looking at the share price gain. And that number jumps to 24.9% including dividends.
In terms of money, that means that £5,000 invested in Tesco 12 months ago is now worth up to £6,245 today. Not bad for a supermarket.
But the more interesting question is, what happens next? Well, depending on which analyst you listen to, the next 12 months could look very different indeed.
What does the most bullish forecast look like?
At the optimistic end of the spectrum sits UBS, which currently carries a price target of 545p on Tesco. Compared to where the stock’s trading today, that represents a potential gain of around 21.7% paired with a dividend yield of 3.2%.
If that target’s hit, then a £5,000 investment today could also be worth roughly £6,245 by this time next year – a repeat performance of the last 12 months.
The reasoning behind UBS’s conviction is well-grounded. Tesco has been steadily rebuilding its market share in the UK, with Clubcard data giving it a structural advantage in customer loyalty and pricing intelligence. That’s an advantage which rivals simply can’t replicate overnight.
Now add in a resilient own-label food range that benefits when consumers trade down, and a free cash flow profile that continues to support both buybacks and a growing dividend. Suddenly, it’s easy to see why the team of analysts at UBS are so optimistic.
What could go wrong?
But not everyone’s as optimistic. Analysts at Jefferies, for example, have a more cautious price target of 460p. That’s 2.7% higher than today’s level. And even with the extra profit from dividends, a £5,000 investment right now may only grow to £5,295 in 12 months – nearly the same as what someone could earn in a high-interest savings account.
What’s got Jefferies so nervous? The cautious stance appears justified. The UK food retail market remains intensely competitive, with discounters like Aldi and Lidl continuing to take share at the value end of the market. While the company has so far proved quite resilient to this threat, it’s nonetheless applying pressure to margins.
Tesco’s vast operations also add complexity. And rising wage costs from higher Employer National Insurance contributions are expected to squeeze margins even further through 2026.
Throw in the extra risk of softer consumer spending, and the stage is seemingly set for a much more challenging market environment throughout the rest of 2026 and into 2027.
Where does that leave investors today?
In my opinion, I think the near-term projection for Tesco shares is somewhere between these two forecasts. This isn’t a story of explosive growth, but rather slow and steady compounding driven by genuine competitive advantages, a seemingly reliable dividend, and a management team that has consistently delivered.
For long-term investors willing to hold through the noise, I think Tesco shares could serve as a credible foundation for a quality portfolio, making it a FTSE stock worth considering in my mind.
Zaven Boyrazian has no position in any of the shares mentioned.
