Next could become 'online marketplace of choice', says HSBC
By Oliver Haill
Date: Wednesday 14 Nov 2018
(Sharecast News) - Next is "well placed" to manage the retail sector's structural shift to online and with strong cash flow driving share buybacks, HSBC upgraded its rating on the stock to 'buy' on Wednesday.
Amid the fallout in the UK department store sector, the bank said Next could also become the "marketplace of choice" for UK apparel online as as third-party brands look for distribution, with overseas growth offering further potential.
Third-quarter results at the end of last month were encouraging, thanks to better-than-expected online growth, which HSBC said derisked the full-year result.
This means analysts' focus shifts to the 2020 financial year "and the potential for more buybacks", supported by the strong cash generation the company has displayed even though its toughest times.
"While sector headwinds remain, Next is well placed to manage the structural shift to online and has hedged its USD sourcing exposure for 12-18 months, mitigating short-term Brexit-related FX-volatility."
With EPS forecasts upped for 2019, 20 and 21, this the analysts said this drove a 6% increase in their target price to 6,050p from 5,700p and an upgrade from their prior 'hold' rating.
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