If bankruptcy can be prevented, JWN stock is a steal at current pricing
Nordstrom, Inc. ( NYSE:JWN) is a luxury department store based in the US. The company’s primary industry competitors include Macy (NYSE:M), Dillard’s (NYSE: DDS), and Kohl’s (NYSE:KSS). Nordstrom and its competitors have all seen drastic decreases to their stock price in 2020. Without a doubt, department stores in general have been heavily impacted by the coronavirus pandemic. Many have already filed for bankruptcy. Others are still at risk of it and, from the current stance on Wall Street, many think Nordstrom is on the brink. JWN has fallen more than 70% since its highs earlier this year. JWN shares currently sit at a price comparable to share price in 2008. Could Nordstrom still very well be a buying opportunity for investors? Is it time to buy the dip?
Nordstrom sports a market cap of $1.87 billion along with a book value of $1.11 per share. The company’s price/book value is 10.95. Further, Nordstrom has a forward p/e (price-earnings ration) of 8.77 and a 12-month trailing p/e of 9.24. Recently, analysts have given Nordstrom a 12 month target estimate of $18.17 which is a 52% increase from JWN’s current stock price.
Nordstrom has missed expectations in three of the past four quarterly earnings reports. The retailer’s biggest whiff came when reporting earnings for the company’s fiscal second quarter of 2020, relaying an when it reported a loss of $3.33 as a result of the lockdowns. Analyst expectations were missed by a whopping $2.26. Analysts expect that Nordstrom will improve their EPS by $1.56, translating to an expected EPS of -$0.06. The company has a trailing twelve-month EPS of -$2.93,significantly stronger than the -$11.83 its primary competitor, Macy’s, currently has.
Nordstrom has been bottom-line profitable for the last four years. The company has demonstrated consistent net income and total revenue, with no major increases or decreases aside from this year. Over the last two quarters this year, the company has seen a significant decrease in overall revenue, falling to less than half of what was produced in the fourth quarter of 2019. The company has gone from consistent profitability to sliding into the red at the bottom line over the last 6 months.
According to the balance sheet, Nordstrom currently has $9.737 billion in total assets. The company’s total liabilities are valued at $8.76 billion, and total equity is valued at $979 million.
Although it is widely known that most companies in the department store and retail sectors are priced for bankruptcy, there will undoubtedly be a few companies that pivot, survive, and recover from current outrageously low share prices. From the view on “Main Street,” Nordstrom has everything it should require to make a strong comeback. The company caters mostly to higher-spending customers, a demographic likely to be least affected financially by the pandemic and shutdowns.
Further, and this is where Nordstrom really sets themselves apart from the competition, the company made the decision to not reduce their inventory at the time around which the public (and potential customers) was emerging from quarantine. As long as Nordstrom was able to successfully move this inventory post-quarantine, the company may be in line for a much quicker recovery than its competition. Holiday shopping is just around the corner, providing hope for a revenue upswing through the end of 2020. If Nordstrom is able to report a profit for the fourth quarter of 2020, JWN shares are positioned to soar in the short term.
The biggest concern for investors in Nordstrom, or any department store or retailer, is the potential for further lockdowns and quarantines. A resurgence in coronavirus cases would be detrimental for Nordstrom’s revenue. Outside of the uncertainty of the ongoing coronavirus pandemic, the company has the potential to, at a minimum, double in stock price in the coming months.