Marks & Spencer share price: Analysts weigh in on retailer after Ocado deal

on Feb 28, 2019
Updated: Mar 11, 2020

Jefferies has lowered its rating on Marks & Spencer (LON:MKS), arguing that the group’s deal with Ocado (LON:OCDO) might be a ‘very expensive way’ for the high street retailer to defend food volumes, Citywire reports. The move came after the companies announced a tie-up yesterday which will see M&S pay £750 million for half of Ocado’s UK retail business.

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Marks & Spencer’s share price tumbled in the previous session as investors digesting the news, including an announcement by the group that it is planning to conduct a rights Issue to raise up to £600 million to fund the deal, as well as to trim its payout to shareholders. The stock closed 12.47 percent in the red at 265.40p yesterday, while this morning, the shares have retreated marginally, having given up 0.34 percent to 264.50p as of 08:05 GMT, compared with a 0.50-percent dip in the benchmark FTSE 100 index.

Jefferies trims stance on M&S

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Jefferies lowered its rating on M&S from ‘buy’ to ‘hold’ yesterday, further trimming its price target on the shares from 310p to 280p. Citywire quoted the broker’s analyst James Grzinic as commenting that the downgrade reflected “concern that today’s deal may represent a very expensive way for MKS to defend food volumes”.

“Secondly, we are worried by the message implicit in the right-sizing of the dividend and the deal’s funding structure,” the analyst pointed out.

Other analysts on retailer

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Liberum reaffirmed M&S as a ‘sell’ yesterday, while Peel Hunt continues to see the high street retailer as a ‘buy,’ without specifying a valuation on the shares. According to MarketBeat, the blue-chip group currently has a consensus ‘hold’ rating and an average price target of 296.50p.

As of 08:18 GMT, Thursday, 28 February, Marks and Spencer Group Plc share price is 264.50p.

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