M&S: Shares in FTSE 100 firm to hit 10-year high, say analysts
Shares in Marks and Spencer (M&S) have been tipped to rocket to their highest valuation in ten years in the wake of the FTSE 100 giant battling a major cyber attack.
Off the back of the British icon’s full-year results, analysts are predicting that shares in M&S will rise to more than 420p each.
The retailer’s shares last changed hands for that much each at the end of December 2015.
They are currently priced at 366p, having fallen sharply after the cyber attack was first revealed in April.
In May, Morning Wire reported that revenue at M&S had increased by six per cent to £13.8bn during its latest financial year.
However, its pre-tax profit fell by almost 24 per cent to £511.8m over the same period.
M&S also confirmed at the time that it would raise its annual dividend by 20 per cent to 3.6p per share this year.
The cyber attack is expected to cost M&S in the region of £300m.
At the start of June, Morning Wire reported that the rise in M&S’s share price before the FTSE 100 giant was hit by a major cyber attack helped its chief executive’s pay swell to more than £7m.
Stuart Machin took home just over £7m for the retailer’s latest financial year, up from the £5m he received for the prior 12 months.
The rise in M&S’s share price over the financial year to the end of March this year was a significant reason behind the boosted pay packet as the retailer’s turnaround gained strength.
Shares in M&S started its latest financial year priced at around 260p but ended the 12 months at around 356p – adding millions to the retailer’s market capitalisation.
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Are M&S shares really set to jump?
But now the dust has settled on M&S’s annual results and the worst of the cyber attack has passed, analysts have turned their attention to what the future could hold for the retailer’s share price.
Keith Bowman of Interactive Investor said: “For investors, an expected hit to operating profit of £300m from its cyber-attack incident is an overhang.
“Both sales (-seven per cent) and profit (-three per cent) for the international business retreated over this latest financial year.
“Its 50:50 joint venture with Ocado continues to lose money, while a forecast dividend yield of 1.6 per cent compares to 3.5 per cent or more at fellow retailers Tesco and Sainsbury’s.
“On the upside, improving sales continue to beef up the group’s balance sheet, with cash held prior to store lease liabilities increasing almost ten-fold year-over-year to £438m and net debt including store leases falling 17 per cent to £1.79bn.
“Insurance payouts may yet reduce the hit from cyber-crime to below £300m, with the attack also speeding up its technology changes and investment.
“Group transformation plans are ongoing including new management at the international business, while cost savings of £120m were made over the past year, with the ambition to achieve cumulative savings of over £500m by March 2028.
“In all, and while the impact of the cyber attack injects some caution, strengthening group finances and a consensus analyst estimate of fair value sat above 420p provide room for longer-term optimism.”