Source: Sharecast
Berenberg pointed to Next's online overseas business, its ongoing development of Next products and wholly-owned brands, the new "Seasons" premium section of its website, and profit growth from a long list of equity stakes in other retailers.
"We favour Next's majority online exposure, as we believe that the current outperformance of online clothing sales versus store sales in the market result from a return of a structural trend following a post-pandemic online correction," said the German bank.
It also noted that Next has about 20% of sales in its home division, a product segment that seems to be "edging back to growth in the UK" after an extended period of decline following the Covid-19 pandemic.
"We value Next using a 15-year DCF featuring a 9% WACC, 2% terminal growth and a 19% terminal adjusted EBIT margin. We apply a 15% premium to the DCF valuation to reach a price target that reflects the appeal of long-trusted management at Next," said Berenberg, which has a 12,600.0p target price on the stock.
Reporting by Iain Gilbert at Sharecast.com