NXT: Future Cash Returns Will Remain Supported By Robust Margin Outlook

The analyst price target for NEXT has been raised materially, with the midpoint increasing to roughly GBP 15,000 per share from about GBP 13,000. Analysts attribute this change to slightly faster expected revenue growth, stronger profit margins and a supportive rerating of the shares in recent research.

Analyst Commentary

Bullish analysts have continued to lift their price targets for NEXT, reflecting growing confidence that the company can deliver above trend revenue growth and sustain attractive margins over the medium term. The recent series of upward target revisions signals that the market is increasingly willing to ascribe a higher multiple to the shares, provided the group executes on its strategic and operational plans.

Across recent notes, analysts highlight a combination of resilient consumer demand, disciplined cost control and effective inventory management as key supports for earnings visibility. The positive revisions also embed expectations that NEXT can leverage its strong brand, online platform and third party label partnerships to drive incremental growth without a commensurate rise in capital intensity.

At the same time, more cautious voices remain focused on the risk that expectations and valuation may now be running ahead of fundamentals, particularly if macro conditions soften or input costs reaccelerate. Neutral stances, including from JPMorgan, suggest that while the direction of travel for earnings is positive, the balance of risk reward at current levels requires careful monitoring.

Against this backdrop, the latest target increases converge around a scenario in which NEXT delivers steady, if not spectacular, top line expansion while defending its margin profile, supporting a premium rating versus much of the broader UK high street peer group.

Bullish Takeaways

• Bullish analysts see the repeated target upgrades as evidence that NEXT is executing well on its omni channel strategy, which they view as justifying a structurally higher valuation multiple compared with domestic retail peers.
• Upward revisions embed confidence that revenue growth can outpace the broader UK apparel market, driven by online penetration, platform partnerships and continued share gains from weaker competitors.
• There is growing conviction that margins can be maintained through tight cost control, pricing discipline and mix benefits. This is seen as supporting double digit earnings growth and underpinning the elevated price targets.
• The higher targets assume that management will continue to allocate capital effectively, balancing shareholder returns with selective investment in technology, logistics and brand positioning to support growth.

Bearish Takeaways

• Bearish analysts argue that, after the recent rerating, much of the medium term earnings improvement is already reflected in the share price. In their view, this may limit further upside without clear positive surprises.
• There is caution that macro headwinds, including pressure on discretionary consumer spending and potential cost inflation, could challenge the optimistic growth and margin assumptions embedded in current targets.
• Some remain wary that increased reliance on third party brands and platform revenues may introduce execution risk, particularly if partner performance or customer loyalty weakens from current strong levels.
• Neutral stances emphasise that any misstep in inventory management or online fulfilment could quickly erode margins, prompting a reassessment of the premium valuation that is currently being ascribed to NEXT.

What's in the News

• Raised full year 2025/2026 guidance, now expecting Total Group sales of £6,870 million versus prior guidance of £6,720 million (company guidance).
• Announced intention to return surplus cash via a special dividend at the end of January 2026, currently estimated at around £3.10 per share, assuming no acquisitions or further buybacks (company announcement).
• Declared an interim ordinary dividend of 87 pence per share for the year to January 2026, with payment due on 5 January 2026 and ex dividend date of 4 December 2025 (company announcement).

Valuation Changes

• The fair value estimate has risen slightly, with the modelled intrinsic value per share increasing from £141.57 to £142.22.
• The discount rate has edged down marginally, moving from 9.07 percent to 9.04 percent, modestly boosting the present value of future cash flows.
• Revenue growth has been revised up slightly, with the long term assumption increasing from 6.41 percent to 6.49 percent.
• The net profit margin has increased meaningfully, with the forecast margin raised from 12.36 percent to 13.04 percent.
• The future P/E has been trimmed moderately, with the assumed forward earnings multiple reduced from 22.5x to 21.4x.