Marks & Spencer share price little changed as RBC lowers valuation

on Mar 11, 2019
Updated: Mar 11, 2020

Shares in Marks & Spencer Group (LON:MKS) have been little changed in today’s session as RBC Capital Markets trimmed its price target on the high street retailer. The move came in the wake of the group’s tie-up with online grocer Ocado (LON:OCDO) announced last month.

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As of 13:02 GMT, Marks & Spencer’s share price had inched 0.19 percent higher to 265.80p, outperforming the broader UK market, largely in line with gains in the FTSE 100 index which is currently 0.24 percent better off at 7,121.52 points. The group’s shares have given up a little more than four percent of their value over the past year, as compared with about a 1.4-percent dip in the Footsie.

RBC lowers valuation on M&S

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RBC, which rates M&S as a ‘sector performer,’ lowered its price target on the shares from 300p to 270p today, following the group’s deal with Ocado which will see the high street retailer pay £750 million to the online grocer for a 50-percent share in the new venture.

“At first sight this looks like a high price,” the broker pointed out, as quoted by Proactive Investors, adding that in effect, M&S was “selling close to 15 percent of its business at 6x EV/EBITDA to finance a business valued on a trailing EBITDA basis at over 30x”.

“However M&S believes it can achieve synergies of at least £70mln per annum by the third year following completion and we think retention of these will be key to making the deal more attractive,” the analysts elaborated, adding that they expect the high street retailer to retain half the estimated cost synergies after investing in making its grocery items more price competitive.

Other analysts on retailer

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Barclays, which is ‘overweight’ on M&S, lowered its price target on the shares from 370p to 335p last week. According to MarketBeat, the high street retailer currently has a consensus ‘hold’ rating and an average price target of 283.54p.

As of 13:50 GMT, Monday, 11 March, Marks and Spencer Group Plc share price is 265.20p.

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