The role of a good investor is to predict what will happen to a stock before it does. After all, buying a stock after it’s already surged in value can be frustrating. I’m not going to pretend it’s easy to try and understand what’s going to happen, but when it comes to the Tesco (LSE:TSCO) share price, I’m pretty confident it could rally in the coming months. Here’s why.
Building the foundation
A month ago, the quarterly trading update saw the share price take a short-term nose dive. On the surface, I understand why. Tesco reported that its like-for-like sales growth over the crucial Christmas period came in below analysts’ expectations. However, in the weeks that have followed, it hasn’t surprised me to see the stock rising again.
Tesco expects profits for the year to be at the top end of its guided range. This signals resilience in a tough retail market. Further, I think it took some time for people to digest the significance of Tesco’s reported market share dominance. It holds a market share of 28.7% as of the end of 2025, its highest level since 2015.
So on balance, the January update helped the company to build the foundation for further potential gains from here.
Spring’s coming
The stock hit highs of 475p back in November. At 451p, it’s still over 5% away from breaking to fresh 52-week highs. Yet I believe it’s coming for a few reasons.
To begin with, grocery inflation’s easing. Data out last week showed grocery price inflation for January was 4%. Not only was this down from the 4.3% reading in December, but it was the lowest level since April 2025. I expect this trend to continue, which will boost Tesco’s profit margins. Investors will be aware of this, so if data in the coming months does show inflation falling, I think the share price could rise.
Another factor will be the full-year preliminary results in April. Of course, the announcement could impact the share price either way. But based on the business feeling the benefit of a higher market share, along with inflation falling, profitability for the full year could beat expectations.
Bringing it all together
By the end of April, I think it’s very plausible the stock will have risen by more than 5% and set fresh 52-week highs. But that’s not the end of the road. As a long-term investor, I think the outlook for 2026 could enable the stock to head higher still.
Of course, there are risks involved. If the April results do impress, the bar of future expectations will rise, making it harder for upcoming earnings announcements. Also, just because inflation’s falling, it doesn’t mean it’s completely gone. It’s still at a level that could cause Tesco headaches if not managed correctly.
Yet despite this, I’m seriously thinking about buying the stock and believe others could consider doing the same.
