Nordstrom Inc.'s (JWN) recent earnings and stock jump should make shareholders happy with the recent rejection of the Nordstrom family's attempt to take the company private at just $50, but some analysts question how long they'll be smiling.
At present, Nordstrom is flying high as the stock is up about 12% this morning to over $58.50 per share, well above the owning family's targeted price.
Deutsche Bank AG (DB) analyst Paul Trussell wrote that Nordstrom's "superior business model drives superior results" in his note raising the price target for his firm to $61 from $56 and issuing a buy rating.
"JWN's second quarter same-store performance clearly separates it from the mid-tier department store group which posted only slightly positive comps this quarter despite the calendar shift benefit that JWN does not enjoy," he explained in a note on August 17.
Jim Cramer's Action Alerts Plus research team, which holds Nordstrom in its portfolio, called results "the quarter we have been waiting for."
Cramer's AAP team highlighted teh e-commerce sector as an opportunity as well, as the company's digital sales grew 23% in the second quarter and now account for 34% of its sales.
Keybanc Capital Markets analyst Edward Yruma drew parallels to Walmart's prominent earnings growth based on digital business.
"Similar to Walmart (WMT) , heavy digital investments position the company well for long-term growth," he wrote.
Walmart saw its share price surge to nearly $100 per share yesterday largely driven by its surprising e-commerce performance.
Yet not all analysts were so bullish, citing significant downside risk associated with the retail industry.
Erinn E. Murphy, senior research analyst at Piper Jaffray & Co. called the second quarter report for the company "befuddling" and set a price target at $49, below the previously proposed buyout price.
"We continue to have longer-term concerns regarding structural headwinds facing the industry," she wrote in a note published on August 17.
"We'd expect shares (while they were up 14% initially at the close) to fade throughout the day as third quarter estimates move down," she predicted.
Morgan Stanley (MS) equity analyst Kimberley Greenberger concurred, citing e-commerce as a potential pitfall rather than a growth engine in her own note this morning.
"E-commerce is lower margin than full-line stores and as greater percentage of sales shift online, we expect margins to continue to suffer," she commented. "Moreover, the digital investment cycle may prove unending as eCommerce leaders (i.e Amazon (AMZN) ) continue to raise consumer expectations for speed, accessibility, and price."
As a result, she set her price target at $47, about $10 below the share price this morning.
Nordstrom is surging at the moment and bulls abound, but it will take time to tell if the retailer can indeed become "the best fashion retailer in a digital world" as Blake Nordstrom suggested in the company's August 16 earnings, or if retail industry roadblocks will be too much for the company as some analysts speculate.