Market Overview

KeyBanc Upgrades Nordstrom, Says Valuation Undervalues Businesses

KeyBanc Upgrades Nordstrom, Says Valuation Undervalues Businesses

Upscale fashion retailer Nordstrom, Inc. (NYSE: JWN) is approaching an era where it's physical asset footprint will hit a peak and take a backseat to e-commerce growth, according to KeyBanc Capital Markets.

The Analyst

KeyBanc's Edward Yruma upgraded Nordstrom from Sector Weight to Overweight with a new $55 price target.

The Thesis

Nordstrom's final major physical footprint projects include a New York City flagship store, the opening of new stores in Canada and Rack stores in the U.S. market. Yruma says this should translate to a drop in capital expenditures from a peak of $1.1 billion in 2015 to around $800 million in 2020. The company is likely to continue closing up to four full-line stores per year.

Meanwhile, Yruma says Nordstrom's online sales of $4.6 billion account for 30 percent of total revenue. On a standalone basis, this would make Nordstrom among the biggest global apparel e-commerce retailers. Sales continue growing at more than 15 percent per year as online customers spend around five times as much as a single-channel customer. In fact, e-commerce gains serve as an offset to the full-line business if it remains pressured

As such, Nordstrom's stock at 12 times 2019 P/E and 5.2 times EV/EBITDA doesn't fully reflect the value of the online business. The stock's valuation remains near a three-year trough despite management's recent comments the demand environment showed signs of improving in mid-March.

Price Action

Shares of Nordstrom were trading higher by around 1.4 percent at $44.78 Wednesday afternoon.

Related Links:

Nordstrom Issues Weak Holiday Sales Report: The Sell-Side Reacts

Nordstrom's Q4 Keeps KeyBanc On The Sidelines And Bank Of America Bearish

Photo credit: GoToVan, via Wikimedia Commons

Latest Ratings for JWN

Jan 2020UpgradesHoldAccumulate
Jan 2020UpgradesUnderweightNeutral
Nov 2019Initiates Coverage OnEqual-Weight

View More Analyst Ratings for JWN
View the Latest Analyst Ratings

Posted-In: Edward Yruma fashion KeyBanc Capital Markets retailAnalyst Color Upgrades Price Target Analyst Ratings Best of Benzinga


Related Articles (JWN)

View Comments and Join the Discussion!

Latest Ratings

TCBIRBC CapitalMaintains59.0
ASMLRBC CapitalMaintains320.0
CLVSB of A SecuritiesMaintains10.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at