Evercore ISI sees a 90% upside

Macy’s Inc (NYSE: M) has made its shareholders nervous with a 30% decline in the stock price over the past three months, but the worst is in the rearview mirror, says Omar Saad, who sees a 90% upside in “M”.

Evercore ISI analyst defends his bold call on CNBC

The Evercore ISI analyst rates Macy’s at “outperform” with a price target of $50. At six times earnings, Saad sees the stock as extremely inexpensive. On CNBC’s “The Exchange”, he said:

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Stores aren’t dead. Omnichannel is proving to be the winning business model long-term. So, companies like Macy’s are finding increased relevance in the marketplace. Macy’s has strong margins, and we expect earnings to rise perhaps even significantly. So, the multiple could expand.

Macy’s is scheduled to report its fourth-quarter results on February 22^nd. Also on Wednesday, the U.S. Census Bureau said retail sales jumped 3.8% in January – beating expectations for a 2.1% increase by a big margin.

Macy’s is yet to fully recover from COVID

Macy’s hasn’t recovered completely in terms of traffic, and Saad expects a continued easing of COVID restrictions to serve as a tailwind for the Ohio-headquartered department store chain. He added:

Macy’s has potential in real estate monetization. It’s also rolling out interesting digital-related services, like advertising services and 3P marketplace business model leveraging its extremely high web traffic, much like Amazon does. That is also a profit opportunity and will expand the multiple.

Earlier this week, Jana Partners disclosed to have slashed its stake in Macy’s by 84%. The activist investor had pushed the retailer late last year to spin off its eCommerce segment. M is up 3.0% today.