Vox Markets Logo

Citi upgrades Next, hikes target price by 40%

10:27, 10th July 2024

[Thomas Dutour - stock.adobe.com]

Citi has upgraded Next Plc   Follow | NXT from 'sell' to 'neutral' and hiked its target price by 40% on the back of an improving macro environment in the UK and the retailer's cash position.

"We believe Next is well placed to benefit from a more positive UK consumer environment, with real wages now positive for three quarters and improving consumer confidence," Citi said in a research note on Wednesday.

The bank estimates that Next will generate around £2bn in surplus cash over the next five years, with further equity investment providing up to 10% upside to earnings per share forecasts for the fiscal year ending July 2025.

Citi has lifted its target price for the stock from 6,500p to 9,120p, based on the shares trading at 13 times forward earnings per share (EPS).

The target price "assum[es] a +5% uplift to our EPS from assuming c.50% of Next's surplus cash is used for equity investments (with a 25% ROCE), and the remainder used for buybacks", it said.

The stock was up 0.7% at 8,734p by 0925 BST.

Stock Chart | NXT

Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.