Berenberg cuts price target on 'sell' rated M&S

Analysts at Berenberg cut their target price on retailer Marks & Spencer's shares from 250.0p to 160.0p on Monday, stating that they felt that the downgrade cycle was "not yet over" for the group.

Berenberg said that with Marks & Spencer's stock down roughly 60% since its downgrade to 'sell' in July 2016, but the structural issues now well known, the 'sell' case was less clear cut.

Nonetheless, M&S was still "the second-largest apparel and footwear brand in the UK", according to Euromonitor, and issues in its clothing and home division were "far from fixed", Michelle Wilson, Graham Renwick and Michael Benedict said in a research note sent to clients.

"With C&H accounting for circa 62% of UK and 46% of group profit, we believe consensus forecasts of flat profit over the mid-term still look optimistic," said Berenberg.

"We are 0%/9%/15% below consensus pre-tax profit in FY20E/FY21E/FY22E. The increase to our EBIT forecasts is driven by IFRS 16, while we cut our underlying PBT estimates by circa 2% in FY20E and 12% in FY21E."

Berenberg added that its 25-30% earnings per share downgrade reflected the capital raise used to fund M&S' retail joint-venture with Ocado.