Marks and Spencer (LSE: MKS) shares are flying at the moment.
They’re up 61% in the year so far and are one of the best performers on the FTSE 250. They’re now within spitting distance of the FTSE 100.
This isn’t an empty talking point either. If the company does rejoin the UK’s biggest index, then a ton of FTSE 100 index funds will automatically buy its shares and push its share price up. So, this might be a great time to buy in.
Let’s look at what it needs to do to get onto the index and when I think the likeliest date will be.
To recap, M&S was a Footsie mainstay for years. It was one of the companies that was on the index when it began in 1984 and held its position until a few years ago. It was a big moment when it dropped out in 2019.
The drop happened after a series of rough years. The shares had fallen from over £7 to below £2 and its market value fell below the minimum for the index. Then the pandemic came along and didn’t exactly help matters.
Automatic entry
So, how can it get its place back on the FTSE 100? Well, it all comes down to market value. A company gets automatic entry if it’s in the top 90 by market value. Likewise, it gets an automatic demotion if it drops below the top 110.
After a good run this year, Marks and Spencer is up to a £3.97bn market cap. That places it in 96th position. Close, but not quite high enough yet.
| 87 | Diploma | FTSE 250 | £4.35bn |
| 88 | Airtel Africa | FTSE 100 | £4.34bn |
| 89 | Dechra Pharmaceuticals | FTSE 250 | £4.33bn |
| 90 | Endeavour Mining | FTSE 100 | £4.18bn |
| 91 | Taylor Wimpey | FTSE 100 | £4.16bn |
| 92 | Howden Joinery | FTSE 250 | £4.13bn |
| 93 | DS Smith | FTSE 100 | £4.11bn |
| 94 | IMI | FTSE 100 | £4.06bn |
| 95 | Fresnillo | FTSE 100 | £3.98bn |
| 96 | Marks and Spencer | FTSE 250 | £3.97bn |
| 97 | Intermediate Capital | FTSE 250 | £3.92bn |
Based on the above, the retailer needs a 5% uplift to make it to the top 90. With the momentum from this year – after a terrific full-year update – I can see a promotion in the near future.
The FTSE reshuffle is done quarterly and the next one is scheduled for September. I’d say that’s a little early. Marks has nothing on the calendar until its next trading update on November 8. I’ll be keeping an eye out for that date.
The next reshuffle, in December, comes shortly after it. I think there’s every chance that’ll be the day we see Marks rejoining the FTSE 100.
260p price target
Some analysts think so too. Barclays just put its price target for the stock up to 260p. That’s a 29% upswing and would put it easily in the higher index. Although I’ll point out that not every big analyst is quite so bullish.
Do I want to buy the shares here myself? Well, it’s a tricky one. I feel the firm has good momentum, a superb brand and I like what management is doing. I do think it will make it to the FTSE 100 sooner rather than later.
But I can’t ignore the dark clouds over the British high street. Wilko’s urgent search for a rescuer underlines ongoing issue for retailers. Will the same fate one day befall Marks and Spencer? It’s hard to say, but it’s a concern. I think I’ll leave this stock on my watchlist for now.
