Last Update24 Oct 25Fair value Increased 1.09%
NEXT Analyst Price Target Rises Amid Cautious Optimism
Analysts have increased NEXT’s price target from £128.16 to £129.56 per share. This adjustment reflects cautious optimism driven by improved sentiment and recent research updates, despite minor downward adjustments to revenue growth and profit margin expectations.
Analyst Commentary
Bullish Takeaways
- Bullish analysts have raised their price targets, signaling increased confidence in NEXT’s valuation prospects.
- Recent upward adjustments suggest that the company’s latest performance and forward guidance are being received positively by the market.
- Improved sentiment is attributed to NEXT’s ability to adapt to shifting consumer trends and maintain operational resilience.
- Anticipated steady revenue streams as well as disciplined execution support the higher share price expectations.
Bearish Takeaways
- Some analysts continue to maintain a cautious stance, indicated by Hold ratings despite the raised price target.
- There remain concerns about the sustainability of profit margins as market dynamics evolve.
- Moderate adjustments to revenue growth forecasts reflect ongoing uncertainties in the retail environment.
- Cautious analysts highlight that valuation gains may be limited unless NEXT demonstrates consistent execution and margin improvement over time.
What's in the News
- NEXT plc announced an interim ordinary dividend of 87 pence per share for the year to January 2026, with a total value of around £99 million. The dividend will be paid on 5 January 2026. Shares will trade ex-dividend from 4 December 2025, with a record date of 5 December 2025. (Key Developments)
- NEXT plc commenced a share buyback program on 11 August 2025, permitting the repurchase of up to 18,467,000 shares, representing nearly 15% of issued share capital, following shareholder approval at the May 2025 AGM. The program will end at the 2026 AGM or on 15 August 2026, whichever comes first. Repurchased shares will be cancelled. (Key Developments)
- The company raised its earnings guidance for the full year 2025/2026, now expecting total group sales of £6.72 billion, up from previous guidance of £6.63 billion. (Key Developments)
Valuation Changes
- Consensus Analyst Price Target has risen slightly from £128.16 to £129.56 per share.
- The Discount Rate has declined modestly from 8.90% to 8.75%.
- Revenue Growth expectation has fallen from 5.92% to 5.47%.
- Net Profit Margin forecast has decreased from 12.63% to 12.40%.
- The Future P/E ratio has increased from 19.10x to 20.94x.
Key Takeaways
- Expanding international business through strategic marketing and modernized operations aims to increase revenue growth and resilience against inflationary pressures.
- Investments in technology and AI-driven efficiencies intend to reduce costs, improve margins, and enhance earnings through diversified revenue streams and strategic acquisitions.
- Concerns over stagnant retail sales, new store risks, markdown impacts, increased working capital needs, and warehouse disruptions may pressure profitability and operational efficiency.
Catalysts
About NEXT- Engages in the retail of clothing, beauty, footwear, and home products in the United Kingdom, rest of Europe, the Middle East, Asia, and internationally.
- NEXT is focusing on expanding their international business, particularly by leveraging aggregators and optimizing marketing strategies, which is expected to drive international sales and eventually improve overall revenue growth.
- The company's investments in warehousing mechanization aim to enhance operational efficiencies and reduce labor costs, which could help improve net margins or maintain them despite inflationary pressures.
- NEXT plans to continue expanding its Online platform with a focus on non-NEXT branded offerings, including wholly-owned brands and subsidiaries, which could significantly boost earnings and diversify revenue streams.
- The investment in modernizing technology and implementing AI-driven efficiencies is expected to reduce technology costs and improve output, positively impacting net margins and potentially increasing earnings over time.
- The anticipation of improved sales in certain international territories, alongside cautious management of surplus cash and strategic acquisitions, may enhance earnings per share as the company leverages buybacks and maintains investment grade credit ratings.
NEXT Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming NEXT's revenue will grow by 5.9% annually over the next 3 years.
- Analysts assume that profit margins will increase from 12.0% today to 12.6% in 3 years time.
- Analysts expect earnings to reach £918.5 million (and earnings per share of £8.07) by about September 2028, up from £736.1 million today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.1x on those 2028 earnings, up from 18.7x today. This future PE is greater than the current PE for the GB Multiline Retail industry at 13.0x.
- Analysts expect the number of shares outstanding to decline by 2.94% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 8.9%, as per the Simply Wall St company report.
NEXT Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The decrease in retail sales by 1.1% in the UK market and the indication that physical retail locations are trading water at best suggest potential ongoing challenges in maintaining or increasing revenue through this channel, leading to pressure on overall profitability.
- NEXT has highlighted concerns over the profitability of new store expansions, describing the risk as something they are most nervous about, which could lead to inefficiencies and impact net margins if they fail to deliver expected returns.
- The company anticipates significant markdown impacts on profitability due to normalizing stock levels and previous markdown strategies that are not repeatable, which may erode net margins if not managed carefully.
- Concerns over increased working capital requirements, particularly due to a £92 million increase influenced by stock investments, indicate potential cash flow challenges that could affect net earnings if not efficiently managed.
- The potential for disruptions during warehouse transitions, as noted in their previous experiences, poses a risk to sales and operational efficiencies, which could impact both revenue and net margins during these periods.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of £128.16 for NEXT based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of £147.0, and the most bearish reporting a price target of just £114.7.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be £7.3 billion, earnings will come to £918.5 million, and it would be trading on a PE ratio of 19.1x, assuming you use a discount rate of 8.9%.
- Given the current share price of £118.3, the analyst price target of £128.16 is 7.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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