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Nordstrom's Holiday Success Wins a Doubled Analyst Price Target

By Rhian Hunt - Dec 31, 2020 at 1:32PM

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Wedbush bucks overall Wall Street caution to predict a 12.5% upside.

While most Wall Street analysts express a cautious view of fashion retailer Nordstrom ( JWN 4.23% ), Wedbush Securities decided to break with the consensus today by boosting its price target for the stock to $36. This represents more than 12.5% upside potential from Nordstrom's share value at the time the prediction was made, and it more than doubles Wedbush's target from its previous $17 level, Morningstar reports.

The stock market responded positively today to Wedbush's altered price target despite its unchanged neutral rating on the retailer. The new target represents a strong break with other analysts, whose consensus price for Nordstrom is $24.39, which effectively forecasts a 25% downside instead. Even J.P. Morgan, whose research note on Nordstrom said its digital presence gave it an objective advantage over competing department stores, was only willing to set a $27 price target.

A couple fashion shopping at an apparel retailer, checking out with both shoppers and clerk wearing masks.

Image source: Getty Images.

Nordstrom surprised analysts and investors positively with a strong third-quarter report, featuring earnings per share $0.37 higher than analyst expectations. Excess inventory sold off to achieve normal levels before the holidays.

Wedbush maintained its neutral rating while ratcheting up its price target more than 100% because, its research note states, "we see opportunity in share price as stronger-than-expected momentum and holiday business fuels potential for a meaningful positive surprise to fourth quarter." It also says "we reiterate our neutral rating on shares for the longer term," indicating it believes the gains to be a temporary holiday boost only.

But with dramatic e-commerce sales improvement (online purchases now account for 57% of all sales), good cash flow, and the flexibility to refocus toward its off-price Rack segment in response to changing conditions, some analysts believe Nordstrom has potential over the longer haul, too. 

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.

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