Stifel Affirms Nordstrom (JWN) at 'Buy'; Management Positive for H2, Long-Term
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Stifel affirms Nordstrom (NYSE: JWM) with a Buy rating and $58 price target following recent meetings with CFO Mike Koppel and IR Director Trina Schurman.
Analyst Richard Jaffe noted management's positive long-term outlook based on store expansion, business portfolio, and desire to be a tech leader.
We see JWN as a best-in-class retailer, with its great customer experience and inspiring merchandise assortments. We believe in owning the stock for the long term and before management begins to realize the full benefits of their recent intensive investment cycle. We anticipate that with the slowing of investments and the significant reduction of capex in 2016 and beyond, we will see a multi-year improvement in ROIC, coincident with an acceleration of EPS growth.
Additionally, the off-price division continues to provide strong and highly profitable growth. We have seen good results from their young growth divisions (Hautelook, and stores in Canada) and are encouraged by the roll-out of a card-free loyalty program (the benefits of a similar program at KSS were material, helping lift sales and build customer loyalty as it was implemented). As improvement in the core business becomes evident in 2H16 and into 2017, we anticipate shares trading up to approximately 19x our 2017 EPS estimate of $3.10, suggesting a share price of $58 (at a premium to the two year average of the out year consensus multiple of 17x).
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