While most Wall Street analysts express a cautious view of fashion retailer Nordstrom (JWN 3.65%), 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.
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.