On Wednesday, UBS maintained its Sell rating on Nordstrom (NYSE:JWN) stock, yet increased the price target from $13.00 to $14.50. The firm's analyst expressed concerns that Nordstrom will continue to lose market share to off-price retailers and direct-to-consumer (DTC) channels, leading to a potential decrease in earnings per share (EPS) over the next few years.
The analyst predicts a negative 20% five-year EPS compound annual growth rate (CAGR) from fiscal year 2023 to 2028. It is anticipated that revisions to earnings estimates by other analysts will push Nordstrom's stock price closer to UBS's new price target of $14.50.
Despite Nordstrom's third-quarter earnings report, UBS's stance on the company remains unchanged. The analyst suggests that the ongoing challenges Nordstrom faces will likely result in EPS misses and a consequent decline in investor sentiment.
The price target adjustment reflects UBS's outlook on Nordstrom's future financial performance. The firm expects that downward revisions in EPS estimates by Wall Street analysts will influence the stock's trajectory.
In summary, UBS has adjusted its price target for Nordstrom to $14.50, up from $13.00, while reiterating a Sell rating on the stock, citing competitive pressures and expected declines in EPS as key factors for their assessment.
In other recent news, Nordstrom, Inc. (NYSE:JWN) reported a promising Q3 2024 performance with net sales exceeding $3.3 billion, marking a 4.6% increase from the previous year. Comparable sales also saw a 4% rise, and digital sales, now accounting for 34% of total sales, grew by 6.4%. Despite these positive results, Nordstrom has adjusted its full-year guidance to flat to 1% revenue growth, citing a shorter holiday season and broader economic uncertainties as potential challenges in the upcoming fourth quarter.
The company also reported a notable expansion of Nordstrom Rack, with the opening of 23 new stores and double-digit top-line growth. However, the company experienced a sales slowdown in late October, which may impact Q4 performance.
In terms of future outlook, Nordstrom anticipates a 1-2% growth in total company comparable sales and plans to focus on margin expansion through top-line growth and operational efficiencies. The company will also continue to prioritize the holiday shopping experience and invest in supply chain and technology enhancements. Despite the updated guidance reflecting a cautious stance, Nordstrom's strategic focus on customer experience and operational efficiencies positions the company to navigate the uncertain economic landscape.
InvestingPro Insights
While UBS maintains a cautious stance on Nordstrom (NYSE:JWN), recent InvestingPro data paints a more nuanced picture. The company's stock has shown significant momentum, with a 67.02% price total return over the past year and a 17.46% return in the last three months. This performance has brought Nordstrom's stock price to 98.76% of its 52-week high, suggesting strong investor confidence.
InvestingPro Tips highlight that Nordstrom has been profitable over the last twelve months, with analysts predicting continued profitability this year. The company's P/E ratio of 14.14 indicates a relatively modest valuation compared to some retail peers. Additionally, Nordstrom offers a dividend yield of 3.09%, which may appeal to income-focused investors.
It's worth noting that InvestingPro has identified 10 additional tips for Nordstrom, providing a more comprehensive analysis for investors seeking deeper insights. These tips, along with real-time metrics and valuations, are available to InvestingPro subscribers, offering a broader perspective on Nordstrom's financial health and market position.
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