Citi upgrades Next, hikes target price by 40%

Citi has upgraded Next from 'sell' to 'neutral' and hiked its target price by 40% on the back of an improving macro environment in the UK and the retailer's cash position.

"We believe Next is well placed to benefit from a more positive UK consumer environment, with real wages now positive for three quarters and improving consumer confidence," Citi said in a research note on Wednesday.

The bank estimates that Next will generate around £2bn in surplus cash over the next five years, with further equity investment providing up to 10% upside to earnings per share forecasts for the fiscal year ending July 2025.

Citi has lifted its target price for the stock from 6,500p to 9,120p, based on the shares trading at 13 times forward earnings per share (EPS).

The target price "assum[es] a +5% uplift to our EPS from assuming c.50% of Next’s surplus cash is used for equity investments (with a 25% ROCE), and the remainder used for buybacks", it said.

The stock was up 0.7% at 8,734p by 0925 BST.