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On Wednesday, Telsey Advisory Group maintained its Market Perform rating on Nordstrom (NYSE:JWN), with a steady price target of $24.00. The firm's assessment follows Nordstrom's report of sustained growth and a robust earnings performance, which was attributed to increased sales and gross margin.
Nordstrom's full-line segment reported a slight uptick for the second straight quarter after six quarters of decline, alongside continued momentum at its off-price Rack stores.
The company's gross margin saw improvements due to lower promotional activity and sales leverage, which helped to counterbalance higher expense deleverage. With this positive trend, Nordstrom has revised its annual guidance upwards, signaling confidence for the remainder of the year despite ongoing economic uncertainties.
Telsey notes that Nordstrom is strategically focusing on enhancing its digital presence, expanding Rack store openings, and refining execution to elevate the customer experience. However, given the tough macroeconomic conditions, the early stages of growth in both Nordstrom and Rack, and the limited visibility into significant benefits from a potential private buyout, the firm has decided to maintain its Market Perform rating.
The price target of $24.00 is based on an 11.7x multiple applied to Telsey's two-year forward earnings per share (EPS) estimate of $2.05. This valuation aligns with the company's near-term multiple trends. Nordstrom's efforts to capitalize on the first half of the year's momentum while navigating broader market challenges are recognized in Telsey's unchanged outlook.
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