On Thursday, Marks and Spencer Group Plc (LON:MKS:LN) (OTC: MAKSY (OTC:MAKSY)) saw its price target increased by Deutsche Bank (ETR:DBKGn) to GBP4.50, up from the previous GBP4.30, while the Buy rating on the stock was reaffirmed. The decision follows Marks and Spencer's demonstration of sustained growth in its primary divisions, signaling a continued structural turnaround for the brand.
The company's recent performance has bolstered investor confidence in the brand's recovery and the longevity of its turnaround efforts. Yet, questions remain regarding the potential for further sales and profit growth.
Deutsche Bank's analysis suggests that while significant brand improvements have been made, future gains in both the Food and Clothing sectors are likely to be incremental. Notably, only 25% of Marks and Spencer's store space has been converted to the new format, and just half of the targeted GBP500 million in cost savings have been achieved.
Additionally, opportunities for profit enhancement exist within the company's international operations and its partnership with Ocado (LON:OCDO) Retail. In light of these factors, Deutsche Bank has revised its forecast for Marks and Spencer's FY25e profit before tax (PBT) upwards by 6% or GBP50 million to GBP850 million, reflecting the earnings beat in the first half of the year.
The forecast for FY26e has also been increased by 5% to GBP900 million. These adjustments reflect a positive outlook for the company's financial trajectory in the coming years.
In other recent news, Marks and Spencer Group Plc has been the focus of several analyst adjustments. JPMorgan (NYSE:JPM) raised its price target for the company to GBP4.25, maintaining an Overweight rating, based on the company's consistent improvement in its Food, Clothing & Home segments. The firm also raised its forecast for the retailer's FY 25 profit before tax (PBT) by 4% to £810 million.
In addition, UBS initiated coverage on Marks and Spencer, issuing a Buy rating with a price target of GBP4.35, suggesting potential for structural outperformance.
HSBC (LON:HSBA) 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. These are the recent developments in the company.
InvestingPro Insights
Marks and Spencer's recent performance and Deutsche Bank's positive outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $10.44 billion, reflecting its significant presence in the retail sector. With a P/E ratio of 15.75, Marks and Spencer appears to be trading at a reasonable valuation relative to its earnings.
InvestingPro Tips highlight the company's strong financial performance. One tip notes that Marks and Spencer is "Trading at a low P/E ratio relative to near-term earnings growth," which aligns with Deutsche Bank's optimistic forecast for the company's future profits. Additionally, the company has shown a "Strong return over the last three months," with InvestingPro data revealing an impressive 28.61% price total return over that period.
The company's revenue growth of 6.87% in the last twelve months and an EBITDA growth of 8.55% over the same period underscore the sustained growth mentioned in Deutsche Bank's analysis. These figures support the narrative of Marks and Spencer's ongoing structural turnaround.
For investors seeking more comprehensive insights, InvestingPro offers 11 additional tips for Marks and Spencer, providing a deeper understanding of the company's financial health and market position.
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