Nordstrom, Inc. (JWN) shares fell more than 6% during Wednesday's session after UBS downgraded the stock to a Sell rating with a $30 price target. Analyst Jay Sole believes that the department store operator's nearly 50% rise since Aug. 20 is unjustified. Moreover, he expects that a "weak" holiday shopping season, tariff concerns, and ongoing e-commerce disruption could pressure earnings. The analyst believes that the stock's price-to-earnings ratio will revert to 10x from 11.6x as the market takes an increasingly bearish view of long-term earnings potential.
The bearish comments follow favorable commentary from other analysts. Wedbush analyst Jen Redding raised her price target to $36 following a meeting with management, coming away more constructive on the company's local market opportunity and synergies. Credit Suisse analyst Michael Binetti also suggested that U.S. retailers could be trading at a modest discount to their five-year EV/EBITDA multiples, adding some safety margin, but cautioned that bad news is adding up.
From a technical standpoint, the stock broke down from the 200-day moving average and trendline support toward its 50-day moving average at $32.88. The relative strength index (RSI) moderated to 50.11, but the moving average convergence divergence (MACD) could see a near-term bearish crossover. These indicators suggest that the stock could see more downside before experiencing any consolidation.
Traders should watch for some consolidation near lower trendline support at around $35.00 or a move lower to test the 50-day moving average at $32.88. If the stock reverses direction, traders could see a move to test reaction highs near $38.00, although that scenario appears less likely to occur given the recent bearish price action.
The author holds no position in the stock(s) mentioned except through passively managed index funds.