Marks & Spencer Share Forecast November 2021 – Time to Buy MKS?

Shares of high street retail chain Marks & Spencer (LSE: MKS)are in the green today, currently trading at 236.2p at the time of writing. The company has been grabbing the headlines since it’s announced an increase in sales and projected profits for 2021 on Tuesday. The shares increased by almost 20% in a single day as a result of the news. The company has said that years of restructuring and the end of the pandemic are behind these great results.

Marks & Spencer – Technical Analysis

Marks & Spencer’s financial statement indicates a market cap of £445.803 billion with assets worth £863.74 billion. Revenue for 2020 is at £914.45 billion with a profit margin of -2.17% compared to £1018.18 billion in 2019.

Oscillators such as Relative Strength Index (14)(75.9),  Stochastic %K (14, 3, 3)(88.4), Commodity Channel Index (20)(99.1),  Average Directional Index (14)(35.3), and Awesome Oscillator(38.4) are neutral.  Moving averages such as Exponential Moving Average (10)(225.3),  Simple Moving Average (10)(225.2), Exponential Moving Average (20)(212.8), Simple Moving Average (20)(206.4), and Exponential Moving Average (30)(205.1) are indicating a buy action.

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Recent Developments

Marks & Spencer is one of the most well-known retail brands within the United Kingdom, boasting some of the best brand recognition. As a diverse company, It offers over 100 different brands of clothing, home appliances, and even banking services to its customers. This diversification allows the company to generate revenue from multiple streams. The company has also made efforts to restructure its business around its 46 flagship websites over the past few years. These efforts paid off as evidenced by an increase in e-commerce sales by 75% across 100 different countries which is responsible for its sudden uptick in profit projections. However, the company faces challenges due to Brexit and the Pandemic.

Marks & Spencer has reported profits before tax of £269.4 million which was well ahead of analysts’ expectations of £205 million -£264 million. All of its main divisions experienced underlying improvements, as the company took advantage of a bounce-back in trade from the pandemic. While there are chances that this rebound would continue, the longer-lasting health of the underlying business is what’s important. Its joint venture with Ocado is successful and has opened three customer fulfillment centers.

Should You Buy MKS Shares?

Investors interested in MKS shares should look at the company’s financials. While its share price has surged, its P/E ratio is rather disappointing. At the time of writing, the P/E is around 188. This means individuals are paying almost 200 times what the company is earning per share. This has been a result of projected profits exciting investors who are jumped in early on the hopes that the share price will continue to rise.

The company has also closed 11 of its stores in France, citing new costs incurred from doing business across the European Economic Community (EEC) border. This is something most of its peers are also facing, such as Tesco closing all of its stores in Finland. While cutting running costs is always good, reduced international revenue may hurt in the long run. While investors will be pleased to see increasing revenues and cost-cutting measures, Brexit presents an ongoing challenge to its international operations that will continue to hurt for years to come. Judging by this now is not the time to buy MKS shares. You may reconsider if it continues to successfully pivot to online sales and maintains profitability.

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