Monday, January 24, 2011

Macy's, Inc (NYSE: M) Q1 2011 Analysis

Recent price: 23.45$
P/E Ratio: 21.56
3 month Target Price: 25$

Company Description
Macy's, Inc., with corporate offices in Cincinnati and New York, is one of the nation's premier retailers, with fiscal 2009 sales of $23.5 billion. The company operates about 810 Macy's department stores and furniture galleries in 45 states, the District of Columbia, Guam and Puerto Rico, as well as The Bloomingdale's brand includes 40 stores in 12 states and Macy's, Inc.'s diverse workforce includes approximately 161,000 employees. Prior to June 1, 2007, Macy's, Inc. was known as Federated Department Stores, Inc. The company's shares are traded under the symbol "M" on the New York Stock Exchange.

Confidence Margins
Strong resistance $26.13 (+11%)
Light resistance $25.06 (+7%)
Light support $21.90 (-7%)
Strong support $19.07 (-19%)

This popular retailers saw it's stock price stumble because of disappointing holiday season sales figures. Indeed those came below of analyst's expectations. A nearly 10% intra-day drop is however unjustified, since the profitability of the company should remain strong.

Entry strategy
For the cautious investor:
Buy the stock for 24$ or less.

For the risk-taking trader:
The May 2011 25$ call option contract seems to be the right position to take, they can be acquired for about 115$ per contract.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 25$, or keep it until 26$ if you are more bullish. If the stock came to drop significantly under current levels, it will be better to close the position since the light support level would incur a near 7% loss.

For the risk-taking trader:
The contracts should be kept until the underlying reaches around 25$. This should provide a satisfactory return if the underlying reaches the target price.

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