Myer Holdings Limited: A Good Buy or A Good Bye?

  • Sep 24, 2018 AEST
  • Team Kalkine
Myer Holdings Limited: A Good Buy or A Good Bye?

Myer Holdings Limited (ASX:MYR) witnessed a positive momentum in September 2018. The primary reasons for the strong performance in the company’s shares could be the company’s unexpected results coupled with the new strategy adopted by the company’s top management. However, the analysts are still confused on the company’s outlook. After the company reported the results, its stock started heading northwards primarily on the back of the investors’ interests. It seemed that some investors are still positive on the stock’s outlook. The investors’ have confidence in the new CEO’s (chief executive officer) turnaround strategy.

The shares of Myer were ranked 8th when considered the short selling done on various stocks. The primary reason for this is that market participants are of the view that the company would be witnessing hurdles in the long-term growth on the back of the lease liabilities which amounts to $2.7 billion. However, when the chief executive of the company came up with its turnaround strategy, the market participants started believing in the long-term potential of the stock.

However, it seems like the analysts still don’t have confidence. Some of the analysts have given the stock a “neutral” rating which is the best rating according to them. It could be considered the stock managed neutral rating primarily because of the turnaround strategy. Of the ten analysts covering the stock, 50% have suggested “wait and see” while the remaining half (50%) are suggesting to avoid the stock. 

In the prior year, of the eleven analysts covering the stock, buy rating was given by two analysts, sell was given by four analysts while hold rating was suggested by five analysts. On the bright side, the stock’s rating got improved when the company reported results from JPM Morgan (NYSE:JPM). Earlier the rating was “underweight” and after it got upgraded to “neutral.” In addition, JPMorgan also raised the target price on the stock. It was increased from 37? to 43?. The broker has positive view on the chief executive’s new strategy. Moreover, it added that risk-reward ratio is heading in the favorable direction.

According to the analysts, the new strategy might prove beneficial for the company in terms of its profits amid the downward momentum in the company’s sales figure. UBS also has the favorable outlook on the company’s expected performance as the firm improved its rating. Earlier it has given sell which has been changed to neutral after the company posted yearly results. According to UBS, the company posted weaker results however, they were as per the expectations.

The positive recommendations of UBS came on the back of the positive momentum in the QoQ sales, gross margins. However, the loan covenants also saw some relaxation. The key highlights of the new chief executive’s strategy involves clearance floors’ closing, lower discounts, an improvement with respect to the customer service, keeping exclusive brands as well as strategy to reduce the number of stores.

Who all are suggesting good bye?

The underperform rating allotted by the Credit Suisse reflects that the company has a bearish outlook on Myer. According to Credit Suisse, exclusive brand strategy has not been able to achieve the targeted customer satisfaction. Another firm, Citi, maintained a “sell” rating on the stock. According to them, risk-reward doesn’t seem to be favorable and Myer also has strategy concerns.

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