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On Tuesday, Goldman Sachs analyst Richard Edwards upgraded Next (LON:NXT) Plc. shares, moving the rating from Neutral to Buy and increasing the price target to GBP140.00, up from the previous GBP122.00. The upgrade aligns with the company’s strong market performance, with the stock trading near its 52-week high and showing an impressive 39.61% return over the past year, according to InvestingPro data. The upgrade reflects a positive outlook for the retailer in a challenging economic climate, with an emphasis on the company’s potential for international expansion and the strength of its UK online platform.
Edwards highlighted Next’s position as a growth-oriented retailer with a relatively stable share price, particularly in comparison to other companies covered by the firm. The company’s strong fundamentals support this view, with revenue growth of 11.42% and a healthy gross profit margin of 43.5%. The new price target, set at 14,000p, is based on adjustments to earnings forecasts and a revised Beta metric, which decreased from 0.9 to 0.77, leading to a lower weighted average cost of capital (WACC) at 9.7%, down from the prior 10.7%.
The analyst’s valuation employs a discounted cash flow (DCF) approach and takes into account Next’s international growth opportunities from a currently small base. The updated price target suggests a forward price-to-earnings (P/E) ratio of 18.3 times for January 2027 estimated earnings, a slight decrease from the 18.4 times earnings valuation of enterprise value to net operating profit after taxes (EV/NOPAT) previously projected.
In his comments, Edwards said, "Against the backdrop of the currently uncertain economic environment, we view Next as a compounding growth retailer with low share price volatility relative to our coverage, with a significant international growth opportunity from an immature current base, and a proven UK online platform."
The revised price target of 14,000p from the previous 12,200p reflects Goldman Sachs’ confidence in Next’s strategic direction and its ability to navigate the uncertain economic landscape while pursuing growth and maintaining a robust online presence in the UK market. InvestingPro analysis reveals the company maintains a "GREAT" financial health score of 3.37, with 8 additional exclusive tips available to subscribers. For comprehensive insights into Next’s valuation and growth metrics, explore InvestingPro’s advanced analytics platform.
In other recent news, BofA Securities has reinstated its coverage on Next Plc with a Neutral rating and a price target of GBP96.00. The decision to resume coverage comes with an analysis of Next’s potential for growth and its current valuation. Analyst Joffrey Bellicha Meller from BofA Securities provided insights into the company’s strategy, highlighting the expectation that Next will reinvest benefits from operating leverage into marketing and digital capabilities. This reinvestment is projected to align the company’s financial estimates with both the consensus and the overall industry. Meller’s valuation model utilizes a discounted cash flow approach, supporting the price objective of 9,600 pence. Next’s shares are trading at a price-to-earnings ratio of 13 times, which BofA Securities considers fair and consistent with the company’s historical average. The reinstatement of coverage offers investors an updated perspective on Next’s market performance and future outlook.
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