Stock Pick: Nordstrom Looks Like a Cheap Play on High-End Retailing

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This article is an excerpt from Barron’s 10 favorite stocks for 2022. To see the full list, click here.

Nordstrom

looks like a cheap play on high-end retailing. At about $20, the stock trades for about 10 times projected 2022 earnings and for just 50% of sales, based on its enterprise value (market value plus net debt), a discount to nearly all of its peers.

Evercore analyst Omar Saad is among the few Wall Street bulls on Nordstrom (ticker: JWN). He sees a favorable risk/reward. He projects $2.20 in 2022 earnings and says the stock could hold at about $20, even if profits fall to $1.50. In a bullish scenario in which margins and sales outpace expectations, Nordstrom could earn $4 a share and the stock could top its high of $46 in March.

The company gets 40% of its sales online and has rationalized its physical footprint to about 100 full-service stores, while using small neighborhood stores in urban areas for online pickups, returns, and alterations.

Given its family control, Nordstrom is apt to resist any attempt by activist investors to spin off its online business along the lines of what 

Macy’s

 (M) and 

Kohl’s

 (KSS) are facing.

Still, a deal for the company isn’t out of question, given a digestible market value of little more than $3 billion.

Company / Ticker	Recent Price	YTD Change	2021E EPS	2022E EPS	2022E P/E	Dividend Yield	Market Value (bil)
Amazon.com / AMZN	$3,377.42	4%	$41.11	$51.37	65.7	None	$1,713
AT&T / T	23.71	-18	3.38	3.17	7.5	8.8%	169
Berkshire Hathaway / BRK.A	454,550.00	31	17,466.30	18,928.50	24.0	None	673
General Motors / GM	58.39	40	6.73	6.93	8.4	None	85
Hertz Global Holdings / HTZ	21.01	-22*	4.02	2.55	8.2	None	10
IBM / IBM	125.93	5	10.05	11.04	11.4	5.2	113
Johnson & Johnson / JNJ	173.01	10	9.83	10.38	16.7	2.5	455
Nordstrom / JWN**	20.05	-36	1.27	1.99	10.1	None	3
Royal Dutch Shell / RDS.B	42.82	27	4.86	6.19	6.9	3.9	166
Visa / V***	214.37	-2	5.91A	7.04	30.5	0.7	467

*Since July 1. **Estimates for Jan. 2022 and Jan. 2023 fiscal year ends. ***Sept. fiscal year end. E=estimate. A=actual.

Source: FactSet

Write to Andrew Bary at [email protected]