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Investing.com - UBS maintained its Sell rating and $6.00 price target on Macy’s (NYSE:M) stock, representing a 49% downside from current levels. The stock currently trades at $12.48, with a P/E ratio of 6.2x, significantly below industry averages.
UBS analyst Jay Sole predicts Macy’s will continue to lose market share due to significant challenges compared to peers in price, product, and service areas. The firm forecasts a negative 13% five-year earnings per share compound annual growth rate from fiscal year 2024 through fiscal year 2029. According to InvestingPro data, revenue has already declined 3.77% over the last twelve months, with 12 analysts revising their earnings expectations downward.
The investment bank believes this projected earnings growth trend will maintain pressure on Macy’s price-to-earnings multiple. UBS noted that new Macy’s CEO Tony Spring is implementing a strategy centered around service improvements.
UBS expressed skepticism about this approach, stating that investment in service won’t be sufficient to prevent market share losses to other retail channels because service isn’t a primary concern for Macy’s shoppers.
While survey metrics for Bloomingdale’s appear more favorable, UBS doesn’t believe Bloomingdale’s is large enough or profitable enough to offset the market share losses experienced by the core Macy’s business.
In other recent news, Macy’s, Inc. announced the pricing of $500 million in senior notes due 2033, with proceeds intended to fund a tender offer and redeem $587 million of existing notes. Concurrently, Macy’s has launched a $175 million tender offer to purchase outstanding notes and debentures, with Wells Fargo (NYSE:WFC) Securities and US Bancorp (NYSE:USB) as lead managers. The tender offer targets four series of notes with varying priority levels and is contingent upon the completion of the new senior notes offering. UBS has reiterated its Sell rating on Macy’s stock, citing concerns over market share and a projected negative earnings growth rate through 2029. Despite new CEO Tony Spring’s strategic initiatives, UBS remains cautious about Macy’s ability to execute its plans effectively.
Conversely, TD Cowen raised its price target for Macy’s stock to $13, maintaining a Hold rating following the company’s first-quarter earnings report. Macy’s reported earnings per share of $0.16, exceeding expectations and leading to a more favorable outlook on sales declines. However, the company issued a conservative earnings guidance for fiscal year 2025, projecting a decrease from previous forecasts. TD Cowen’s analysis reflects both the positive quarterly performance and ongoing economic challenges that may affect Macy’s future earnings.
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