Macy’s Cuts Future Outlook

Macy’s Inc. (Ticker Symbol: M) released quarterly revenue results that were weaker than analysts were expecting.  The American department store chain founded in 1858 reported an earnings per share beat of .07 cents per share vs. Wall Street analysts estimates of breakeven. Macy’s released revenue that was slightly weaker than expected at $5.17 billion vs. Wall Street analysts’ expectations of $5.32 billion.  Same-store sales reported were a slight miss at down 3.5% vs. a drop of 1%, which is what Wall Street was looking for.  

The company gave shareholders an update on its future outlook for the year.  Macy’s is now expecting its same-store sales to be down 1% to 1.5% vs. the previous range of flat to a 1% gain. The company also lowered its sales forecast and is looking for a 2% to a 2.5% drop vs. the previously forecasted range of flat for the year.  Additionally, Macy’s also lowered its earnings per share guidance and now expects its earnings for the year to be in a range between $2.57 to $2.77 which was down from its previous range of $2.85 to $3.05 and below the street’s expectations of $2.80 per share.     

The above image is a chart of Macy’s stock over roughly the past 13 years.  Macy’s stock was hit during the great recession and traded down to its lowest levels of the decade finding price support just under the $6.00 dollar level.  Macy’s stock found support when the then-Chairman of the Federal Reserve, Ben Bernanke, announced the beginning of the Federal Reserve’s quantitative easing policy, which would continue for almost a decade. The stock did, however, find life again and broke above its two-year-long downtrend in the third quarter of 2009.  Macy’s began a strong uptrend, finding dynamic price support multiple times over the next six years at its 50-week moving average. The stock proceeded to rally over 900%, trading to an all-time high of $73.61 on July 17th, 2015.  

Unfortunately for shareholders, the stock began to form a bearish divergence, where the stock makes a higher high in price but the Relative Strength Index makes a lower high.  Often times this leads to a reversal or a change in trend, as occurred in Macy’s case. The stock began a steep sell-off, pulling back over 75% before finding some price support just under the $20.00 price level.  The stock made a brief attempt at a rally in 2018, but that was met with more selling pressure from institutions and the stock continued its downtrend lower. Currently, the stock is trading below its 50-week moving average and is negative for the year.

(Chart above courtesy of ​www.tipranks.com​)

Based on a survey of nine analysts offering 12-month price targets, the average price target for Macy’s stock is $15.00. According to that number, the stock is priced at a slight premium relative to Wall Street analysts and could be considered overvalued around current levels near $15.43.

Investors in the company should look to Macy’s next earnings release on February 20th for fresh news within the business.

 


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