What happened

On a bizarre day in the market, shares of Macy's (NYSE:M) were flying higher today while the rest of the market was crumbling. Macy's bounce came a day after investors mostly shrugged off a better-than-expected second-quarter earnings report, and could be a sign of a short squeeze as investors had been betting against the stock heavily coming into the report.

As of 1:01 p.m. EDT, the stock was up 11.2%, even as the S&P 500 index was down 3.5%.

The Macy's store at Herald Square

Image source: Macy's.

So what

While revenue plunged 36% to $3.56 billion, that managed to beat the analyst consensus of $3.47 billion, and management said that sales were better than anticipated at all three brands -- Macy's, Bloomingdale's, and BlueMercury -- as it recovered from the depths of the crisis in March and April. On the bottom line, it posted an adjusted loss per share of $0.81, which compared to a profit of $0.28 per share a year ago and estimates of a $1.77 per-share loss.  

The stock briefly popped yesterday morning before closing the day out nearly flat. Not much has changed today. A pair of analysts weighed in on the stock after yesterday's session, with Goldman Sachs maintaining a sell rating on Macy's and a $4 price target, while Deutsche Bank raised its price target to $7 from $6, but kept the stock at hold.

Trading volume was nearly double its average rate, which could be a sign that short-sellers are buying back stock as Macy's performance seems to have bottomed out. Forty-seven percent of the float was sold short as of Aug. 14, a substantial percentage.

Now what

There's no question that Macy's faces a steep climb out of the crisis, but those challenges appear to be reflected in the stock price. Performance should gradually recover as the economy normalizes, and Macy's is still sitting on a bevy of valuable real estate, including its Herald Square headquarters in New York, which was valued at $4 billion at one point. By contrast, the company's market cap is only $2.4 billion, though it carries more than $5 billion in debt.

Macy's stock is mostly at the whim of the pandemic. However, if a vaccine comes out sooner than expected, the department store chain should be one of the biggest beneficiaries.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.