Nordstrom Inc. (Ticker Symbol: JWN) released earnings for the quarter that were much better than analysts were expecting. The luxury department store reported an earnings per share beat of .81 cents per share vs. Wall Street analysts’ expectations of .64 cents per share. However, the Seattle, Washington-based company reported revenue of $3.67 billion which was right in-line with Wall Street analysts’ expectations. Additionally, last quarter Nordstrom lowered its earnings guidance for the year from $3.25-$3.50 per share, which is down from $3.25 to $3.65 it had guided previously.
Nordstrom saw an increase in its online sales as digital sales increased to 34% of the company’s total sales volume, citing strength in its in-store pickups. In October of this year, the company opened its first department store for women in New York. The store will take up a 300,00 square foot space and will be located adjacent to the men’s department store that Nordstrom opened in April of 2018.
The above image is a longer-term chart of Nordstrom’s stock over roughly the past seven years. The stock spent all of 2013 and half of 2014 trading in an ascending triangle, where the top part of the triangle appears flat and the bottom part of the triangle has an upward slant. The stock broke out from this pattern to the upside in 2014 and proceeded to rally over 25% over the course of the next year to trade to an all-time high of $83.16 on March 23rd, 2015.
Unfortunately for Nordstrom shareholders, the stock began trade lower, breaking down below its multi-year uptrend and finally finding some price support around the $35.00 price level while forming a bullish divergence. A bullish divergence is where the stock makes and lower low in price but the Relative Strength Index makes a higher low. Traders and investors sometimes look at divergences for a possible pause within the current trend that occurred in Nordstrom’s case. The stock continued to trade sideways trading between the price levels of $65.00 and $35.00 until the end of 2018, where the stock formed a double top reversal pattern. This occurs when the price of a stock reaches a high price, has a small sell-off, then retests that high failing to truly break above it. The pattern is confirmed once it breaks below the low between the two prior highs. Nordstrom broke down from this pattern and proceeded to sell off to its lowest levels it has seen in nearly a decade. Currently, the stock is negative on the year and is finding some dynamic price support at its 50-week moving average.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 11 analysts offering 12-month price targets, the average price target for Nordstrom’s stock is $37.44. According to that number, the stock is priced at a premium relative to Wall Street’s analysts and could be considered overvalued around current levels near $38.40.
Investors in Nordstrom should look to their next earnings release on March 1st for fresh news within the company.