Analysts at Credit Suisse have downgraded their rating for Next PLC (LSE:NXT) to 'underperform' from 'neutral' on valuation grounds in spite of raising their share price target following the retailer's latest trading update.
The analysts lifted their price target for Next shares to 6,100p from 5,200p. In early trading on Friday, the shares were down 1.3% at 6,432p.
The Credit Suisse analysts pointed out that Next shares have risen by almost 50% from October 2022 lows, and noted that on 13.2 times 2023/2024 estimated price-to-earnings, they do not look cheap versus its history, retail peers or the UK market.
"While Xmas trading was strong for most retailers, we see downside risk to demand in the spring, given tough comps, and as UK property prices and employment soften, while the outlook for opex remains challenging," they said in a note to clients.
"With limited upside to valuation and strong execution already discounted, we downgrade our rating to underperform (from neutral) as we believe Next is likely to underperform stocks which look cheap versus history, offer greater leverage to a recovery or which can surprise in terms of execution," they added.
The Credit Suisse analysts said they prefer 'outperform' rated Marks & Spencer, JD Sports and Primark owner Associated British Foods.