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Why KeyBanc Upgraded Nordstrom Stock

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Apr. 11 2019, Published 10:24 a.m. ET

Rating upgrade

Nordstrom (JWN) stock rose 1.7% on April 10 after KeyBanc upgraded its rating to an “overweight” from a “sector weight.” Recent meetings between KeyBanc and Nordstrom’s copresident, Erik Nordstrom, and its CFO, Anne Bramman, indicated the company’s intention to transition its asset base to focus more on e-commerce.

According to KeyBanc, Nordstrom stock looks undervalued, as its current valuation doesn’t take into account its strong e-commerce business. KeyBanc has assigned Nordstrom stock a price target of $55.

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Consensus recommendation

On April 10, Nordstrom stock was rated as a “hold” by 17 (74%) of the 23 analysts covering the department store chain. Three analysts had “buy” recommendations, while another three had “sell” ratings.

On February 28, Nordstrom reported mixed results for the fourth quarter of fiscal 2018, which ended on February 2. The company’s revenue fell 4.6% to $4.48 billion and lagged analysts’ consensus expectation of $4.61 billion. Nordstrom’s same-store sales rose just 0.1% as the 4.0% SSSG in its off-price business was offset by a 1.6% fall in the same-store sales of its full-price business. Nordstrom’s EPS rose 23.3% to $1.48 and surpassed analysts’ estimate of $1.42. The company’s bottom line benefited from lower taxes.

On March 1, Credit Suisse lowered its price target for Nordstrom stock to $46 from $50. On March 25, UBS cut its price target to $65 from $66. As of April 10, Nordstrom stock was down 3.6% YTD (year-to-date). Rival Macy’s was down 16.9% YTD, while JCPenney (JCP) and Kohl’s (KSS) were up 21.2% and 7.8%, respectively, YTD as of April 10.

On April 10, the average 12-month price target for Nordstrom stock was $50.69, indicating a potential upside of ~13%.

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