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On Monday, RBC Capital made a positive adjustment to the rating of Marks and Spencer Group Plc (LON::LN) (OTC: MAKSY (OTC:)), raising the stock from ‘Sector Perform’ to ‘Outperform’. Accompanying this upgrade, the firm also increased the stock price target to £3.00 from the previous £2.85.
The retail giant’s shares have experienced a 17% decline from recent peaks, a movement attributed to shifts in investor positioning and growing concerns about the UK consumer sector and cost outlook. Despite these market reactions, RBC Capital maintains that there has not been a significant change in the company’s strong fundamentals.
Marks and Spencer’s stock is currently trading at 10 times the estimated earnings for the calendar year 2024, which, according to RBC Capital, suggests that the market may not be factoring in any growth. However, the firm believes that Marks and Spencer has the potential to achieve growth and deliver on a progressive cash returns policy, thereby increasing its attractiveness to long-term investors.
The analyst’s commentary underscores their perception of the stock’s valuation as undervalued, considering the company’s ability to generate returns and sustain its fundamental performance amidst market skepticism. Marks and Spencer’s commitment to a policy that could progressively return cash to shareholders is seen as a key factor that could drive interest and investment in the stock over the long term.
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