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Hype Asset of the Day | November 28th, 2022



Macy’s Inc. (NYSE: M)

Rowland Hussey Macy established the high-end department store company known as Macy's in the United States in 1858. In 1994, it became a division of the Federated Department Stores, a Cincinnati-based firm that is connected to the Bloomingdale's chain of department stores; the holding company was renamed Macy's, Inc. After the major Black Friday sales of last week, Macy’s has seen an increase in mention by 153% over the last day, prompting investors to wonder if they should take a position in the company now. Currently, the shares of Macy’s are trading at $23.52.



Positive Hype

There are quite a few reasons why Macy’s has generated such positive hype, here are some of them.


  • The stock is down only 15.5% year to date, which is outperforming the S&P 500 index.


  • Not only did Macy's outperform expectations, but management mentioned its inventory position is at "appropriate levels" heading into the holidays.


  • The company still sees revenue of between $24.34 billion and $24.58 billion for 2022, but it boosted its earnings projections by $0.07 per share to a new range of $4.07 to $4.27 per share.


  • The stock pays an above-average dividend yield of 2.79%, supported by the company's profitability, and trades at a cheap valuation of about 5 times expected 2022 earnings.


  • Macy’s 38.7% gross margin outperformed our estimate by 120 basis points as the company partially overcame markdowns through pricing and efficiency efforts. This led to a 3.7% operating margin (versus our 2% forecast) and $0.52 in adjusted EPS that beat our forecast by $0.35.


  • Earnings were still above management's guidance, which was good enough for the market today.


Negative Hype

No investment is free from negatives, and investors must always acknowledge these before making a decision. Here is the downside to taking a position in Macy’s right now.


  • Comparable sales were down 3% year over year, compared to a 37% increase in the same period last year and a 1.5% decrease in the previous quarter.


  • Net sales came in at $5.2 billion, which was down 3.9% year over year but up about 1% compared to pre-pandemic levels in late 2019.

Conclusion

Macy’s seems to be hit by the same plague that has infected other retail companies featuring increases in supply and lower levels of demand due to the current recession. However, it has still surpassed analysts’ expectations and has a very bright and positive outlook for the future, once macroeconomic headwinds are more clear. The company is gearing up for a promising season of holiday sales and at its current price looks like quite the steal, and that is a good reason to put Macy’s on your radar for the near future.


HypeIndex is an AI platform that detects Hype in stocks and cryptos before it moves the market, providing reliable early detection for profitable investment opportunities.

The algorithm for our proprietary HypeIndex score is based on sentiment analysis, data science and machine learning.




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