Next share price tumbles after Deutsche Bank downgrade

on Jan 3, 2017
Updated: Oct 21, 2019
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Shares in Next (LON:NXT) have tumbled to the bottom of the FTSE 100 leaderboard in today’s session, following a downgrade at Deutsche Bank. The analysts have lowered their stance on several UK retailers, arguing that demand is likely to soften this year.

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As of 13:03 GMT, Next’s share price had fallen 3.25 percent to stand at 4,821.00p, underperforming the benchmark FTSE 100 index which has started the new year on an upbeat note and is currently 0.51 percent better off at 7,179.00 points. The retailer’s shares lost more than a third of their value last year, as compared with an over 15-percent rise in the Footsie.
Deutsche Bank trimmed its stance on several UK retailers, including Next, arguing that demand is likely to soften this year.

“Retail stocks are typically early-cycle but there are risks a prolonged downturn means many could be value traps, particularly as the sector is typically showing average rather than extreme valuations,” the analysts pointed out, as quoted by Sharecast. The broker cut the FTSE 100 group from ‘buy’ to ‘hold,’ and trimmed its price target on the stock from 5,950p to 5,300p, noting that credit income is unlikely to remain a tailwind while scope for cost control is likely limited.

Deutsche Bank, however, notes that cash flow should remain strong with capex moderating, while the strong balance sheet allows the entire free cash flow yield of around 8.4 percent to be returned via regular dividends and buybacks.
The 25 analysts offering 12-month price targets for Next for the Financial Times have a median target of 5,000.00p, with a high estimate of 7,200.00p and a low estimate of 4,500.00p. As of January 2, the consensus forecast amongst 27 polled investment analysts covering the stock advises investors to hold their position in the company.
As of 13:36 GMT, Tuesday, 03 January, NEXT plc share price is 4,796.00p.

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