On Tuesday, JPMorgan updated its outlook on Marks and Spencer Group Plc (LON:MKS:LN) (OTC: MAKSY (OTC:MAKSY)) shares, increasing the price target to GBP4.25 from GBP3.60. The firm maintained its Overweight rating on the retailer's stock. The analyst cited the company's consistent improvement in performance across its Food and Clothing & Home segments as the basis for the revised target.
Marks and Spencer has demonstrated notable growth in both top-line revenue and profitability over the past year. This performance has contributed to the company's stock price rising by more than 40% year-to-date. The rise in share value includes recent gains, partly driven by speculation of the company's potential inclusion in the MSCI index next month.
The analysis by JPMorgan delved into Marks and Spencer's opportunities in the kidswear market, a segment where the retailer currently holds a 7% market share compared to competitor Next's 14%. The firm views this area as "low hanging fruit," indicating potential for growth.
Additionally, the report discussed the positive effects of Marks and Spencer's ongoing store rotation program on the company's medium-term prospects.
Based on current business momentum and the insights from their analysis, JPMorgan has raised its forecast for the retailer's FY 25 profit before tax (PBT) by 4% to £810 million. This new forecast positions JPMorgan approximately 4% ahead of the consensus compiled by Bloomberg (BBG cons). The updated figures reflect an expectation of at least low single-digit percentage (LSD%) growth in both the Food and Clothing & Home divisions.
The raised price target and maintained Overweight rating reflect JPMorgan's positive outlook on Marks and Spencer's future performance, underpinned by the company's strategic initiatives and market opportunities.
In other recent news, Marks and Spencer Group Plc has been the focus of several analyst adjustments. Deutsche Bank increased its price target for the company to £4.30, maintaining a Buy rating based on strong performance in its Food division and promising growth in its Clothing segment. The bank also noted the potential for improvement in the company's International sector.
UBS initiated coverage on Marks and Spencer, issuing a Buy rating with a price target of GBP4.35, suggesting that the market has not fully recognized the company's potential for structural outperformance.
HSBC also raised its price target for Marks and Spencer to GBP4.25, maintaining a Buy rating. The analyst noted the successful implementation of the company's 'Reshape for Growth' strategy, which has led to a repositioned food offering and a shift from promotional activities to an Every Day Low Price approach. The company's acquisition of Gist in fiscal year 2022 has been a key factor in modernizing its food supply chain more rapidly.
Marks and Spencer has also seen a recovery in Clothing & Home like-for-like sales, driven by a product-led recovery. It has increased its cost reduction target to GBP500 million by fiscal year 2028. These are the recent developments in the company, as it continues to implement strategic initiatives and shows promising financial health.
InvestingPro Insights
Recent data from InvestingPro aligns with JPMorgan's positive outlook on Marks and Spencer Group Plc (OTC: MAKSY). The company's market cap stands at $10.02 billion, reflecting its significant presence in the retail sector. MAKSY's P/E ratio of 17.35 suggests that investors are willing to pay a premium for the company's shares, possibly due to its growth prospects.
InvestingPro Tips highlight MAKSY's strong performance, noting a "high return over the last year" and that it's "trading near 52-week high." These observations corroborate the article's mention of the stock's 40% year-to-date increase. Additionally, the company's "strong return over the last three months" (31.01%) and "large price uptick over the last six months" (62.75%) underscore the momentum discussed in the JPMorgan analysis.
The revenue growth of 9.29% in the last twelve months supports JPMorgan's expectation of continued growth in both Food and Clothing & Home divisions. Moreover, the EBITDA growth of 18.14% over the same period indicates improving profitability, aligning with the raised profit forecast.
For investors seeking more comprehensive insights, InvestingPro offers 12 additional tips for MAKSY, providing a deeper understanding of the company's financial health and market position.
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