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Investors Told to Wait Until September Before Buying Nordstrom

Telsey Advisory Group says that Nordstrom shares have tripled the return in the S&P 500 this year and there is an additional ten percent rally ahead. The firm had earlier elevated the retailer to an “outperform” rating and emphasized its shares call to hit $ 57.

Dana Telsey, an analyst notified clients on Wednesday that they had come up with renewed optimism concerning the long term growth trajectory of Nordstrom in the Company’s investor meeting held in Los Angeles yesterday. The note further indicated that there is a well-established team and an excellent management team ready to propel the company towards its objective of becoming the leading fashion retailer in the digital world.

Earlier on Tuesday, Nordstrom had described its five-year financial targets with the expectation to grow its earnings from 5 to 6 % from 2017 to 2022 in addition to a growth rate of 3 to 4% in the annualized sales.  The management further expects increased share gains from the firm’s “generational investments in digital sales.”

However, HPM Partners’ Jim Lebenthal asserts that it is quite early to buy the stock even with the firm’s growth targets. Lebenthal believes that this space is characterized by revenue growth and it is not yet clear whether the revenue will continue to grow until later in the year. He thinks that it should all wait until at least September.

Lebenthal recommends Macy’s and Target to investors seeking opportunities in the retail sector since the two retailers have better prospects in addition to lower multiples when compared to Nordstrom. Presently, Nordstrom trades at 15 times next 12-month earnings compared to Target and Macy’s which trade at 14 times and 10 times respectively.

Retail stocks remained under pressure in the better part of 2017 partly due to competition from Amazon. Ultimately, the XRT retail ETF gained 2.5% as opposed to the rise of S & P 500 by close to 20%.

Nevertheless, SaratSethi perceives long-term value in retailers including Macy’s and Hudson’s Bay though the group has rebounded from the previous year lackluster returns. Sethi says that can be invested in since they are companies rich in cash flow and can provide good returns in the future.

Lebenthal and Sethi agree on the fact that investors should wait for sales figures in September before purchasing Nordstrom. Sethi, however, acknowledges that the company is well-run and has high-end customers.

However, Ritholtz Wealth Management’s Josh Brown, says that it is good to consider the fact that these are trades and not investments. This Nordstrom is trading where it had traded earlier in 2012.