What Happened:
Shares of department store chain Macy’s (NYSE:M) fell 5.1% in the morning session after Citi analyst Paul Lejuez downgraded the stock's rating from Neutral to Sell and assigned a price target of $14. The price target implied a potential 30% downside from where shares traded when the downgrade was announced. Lejuez expressed skepticism about the success of a reported $21/share takeover offer by Arkhouse Management and Brigade Capital Management. He highlighted potential financing challenges given the current interest rate environment, as well as structural challenges in Macy's core business.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks. Is now the time to buy Macy's? Access our full analysis report here, it's free.
What is the market telling us:
Macy's's shares are very volatile and over the last year have had 21 moves greater than 5%. In context of that, today's move is indicating the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was one day ago, when the company gained 18.2% following reports from Reuters that Arkhouse Management and Brigade Capital, an investor group, made a $5.8 billion offer to take the company private. The proposal, submitted on December 1, 2023, values Macy's at $21 per share, representing a 20% premium from the company's closing price of over $17/share on Friday, December 8, 2023. The offer, if accepted, would involve acquiring the Macy's stock that the investor group does not already own.
The potential privatization of Macy's could instill confidence in Wall Street, especially amid the ongoing macro uncertainty that has plagued many retailers in recent quarters. This development might also be noteworthy for retail investors evaluating their investment strategies in the sector.
Macy's is down 0.7% since the beginning of the year, and at $19.98 per share it is trading 18.3% below its 52-week high of $24.46 from February 2023. Investors who bought $1,000 worth of Macy's's shares 5 years ago would now be looking at an investment worth $620.43.
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