Proactive Investors - UBS has upgraded its valuation of shares in the high street retailer Next PLC (LON:NXT) and now expects the company's share price to reach 6850p (up from 6,550p).
This comes after Next reported stronger-than-expected sales for the second financial quarter (Q2) of the year, which runs from April to June.
In more detail, Next saw its sales for the first seven weeks of Q2 rise by 9.3%, a figure that vastly outperformed its own prediction, which forecast a 5% drop in sales for the entire three-month period.
According to UBS (LON:0R3T), the strong sales performance can be attributed to two main factors: sunny weather, which often encourages more shopping, and an increase in real wage growth since April, meaning people have more disposable income.
JP Morgan also agrees with this positive outlook. It has likewise upgraded the valuation for Next, setting a slightly higher share price target of 7,000p. This revised target reflects the positive surprise in Next's recent sales update.
However, Jefferies (price target 6,800p) highlighted potential challenges. It acknowledged the strong sales report and sees merit in the increased purchasing power of consumers as a driving force for Next's growth.
However, it also suggested that pressures, such as rising gilt yields (interest rates on UK government bonds) which could affect the cost of borrowing and spending for consumers, shouldn't be overlooked.
All three banks have stuck with their 'neutral' investment stances on the stock in the clothing retailer.
Of the 24 banks and brokerages covering Next, 10 are positive on the stock, while 11 are on the fence.
The consensus price target is 6,933p, a modest premium to the current price of 6,706p (flat).