Bank of America Merrill Lynch’s thumbs up to Next

Tuesday, 27 August 2013
Analysts at Bank of America Merrill Lynch have injected some life into Next’s stock as the broker upgraded British high street fashion retailer Next (LON:NXT) from ‘neutral’ to ‘buy’, helping the shares up 1.4 percent.

“Next remains strongly cash generative and this means it has become a serial compounder with share buybacks (circa 300 million pounds this year alone) adding 4pp to EPS growth per year,” said chief analyst Richard Chamberlain in a note to clients.

After reviewing their analysis on Next, the private bank’s retail team have increased their target price for Next by 55 pounds a share (+5 pounds).

“Premature UK interest rate hikes present a risk but these would be coming off a low base and Next’s online exposure provides it with defensive structural growth, in our view,” noted Chamberlain.

As per the broader retail panorama, Bank of America Merrill Lynch remains optimistic: “We remain broadly positive on General Retail as we believe the consumer outlook has improved in Europe, the sourcing environment is stable and interest rate concerns have been overstated. However not all valuations are now so attractive,” the broker summarised in a note issued earlier this week.

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