After a huge run in 2023, the Marks & Spencer (LSE: MKS) share price has pulled back in 2024. Year to date, it’s down about 7%.
Should investors consider buying the dip? Let’s discuss.
What’s behind the share price weakness?
Let’s first look at why the share price has fallen in 2024.
Earlier this month, Marks & Spencer posted a trading update for the Christmas period. And the numbers were actually pretty good.
For the period, like-for-like sales were up 8.1% year on year, driven by market-leading growth in food. This figure was ahead of forecasts.
Investors didn’t like the retailer’s outlook, however. Not only did the company say that expectations for economic growth remain uncertain, with consumer and geopolitical risks, but it also said that it faces additional cost increases from higher-than-anticipated wage and business cost inflation.
We enter 2024 with a spring in our step, but clear-eyed on the near-term challenges.
Marks & Spencer CEO Stuart Machin
It’s worth pointing out here that last year, the Marks & Spencer share price rose from 123p to 272p – a gain of 121%. So, a pullback (i.e. some profit taking) isn’t really surprising.
Is now the time to buy?
Is this a good buying opportunity? I think so.
I’ve said before that I’ve been really impressed with the company’s recent transformation. With slick, new-look stores, a premium food range, and an improving clothing line, I think the company is positioned well for the future.
Yes, there’s some uncertainty over consumer spending and business costs. These factors could have a negative impact on profits in the near term. However, Marks & Spencer tends to serve an older, slightly more affluent crowd. And this demographic is likely to be less affected by higher interest rates. Meanwhile, slowing UK wage growth should help the company in the fight against rising costs.
Attractive valuation
After the recent pullback, the shares look attractively valued.
For the financial year ending 31 March 2025 (FY25), analysts expect the company to generate earnings per share of 24.8p. That puts the price-to-earnings (P/E) ratio at about 10.3 at today’s share price.
I think that’s an appealing valuation. Especially when we consider that earnings for FY25 are expected to grow roughly 9% year on year.
Still trending up
It’s worth noting that even after the pullback, the shares are still well above their 200-day moving average (this moving average is commonly used to identify long-term trends in the market). And the figure is rising. It essentially means that the shares are still in a long-term uptrend. To my mind, it’s only a matter of time until they start moving higher again.
Putting this all together, I believe investors should consider buying the shares today. I think the recent pullback has presented an attractive investment opportunity.
