Next PLC down to neutral as UBS says limited upside following profit
Despite the rating change, the bank also hiked its target price for the retailer to 8,100p from 6,550p, although added that there is now “less scope for further re-rating and upwards earnings revisions” over the next 12 months
() has been downgraded to ‘neutral’ from ‘buy’ by analysts at UBS, but the bank has also hiked their price target for the retailer to 8,100p from 6,550p following a trading update in which it upgraded its full year profit forecasts.
In a note on Friday, the Swiss bank said following the upward revision to the company’s profit estimates on Tuesday there was now “less scope for further re-rating and upwards earnings revisions” over the next 12 months.
READ: Next makes small upgrade to full-year profit expectations but store closures bite
However, analysts also said that they disagreed with some shorter-term investors who “seem to view the current valuation as a selling opportunity”, although they added that much of the upside was already priced into the shares justifying the rating downgrade.
“Next is a best-in-class operator in apparel, focusing on Online growth, channel integration and the development of higher return platform businesses. While we still see potential long-term earnings upside and re-rating potential from scaling the platform businesses (a valuable business in a largely ex-growth apparel industry), our new analysis suggests the value of Next’s changing business model (incl. Total Platform) is appropriately reflected in the current multiple, limiting further re-rating”, UBS said.
Shares in Next fell 1.8% to 7,554p in late-morning trading.
Read More: Next PLC down to neutral as UBS says limited upside following profit