Editors Note:

Analysts do not like this company but shares are rising. The negativity is huge from the analyst community but shares continue to rise. Shorts are finding it difficult to follow the analysts. Even a weak retail sales report for February only caused a minor decline before the rebound continued. This is great relative strength and maybe we should tag along for the ride.


NEW DIRECTIONAL CALL PLAYS


JWN - Nordstrom - Company Description

Nordstrom is a fashion specialty retailer offering apparel, shoes, cosmetics and accessories for men, women and children in the U.S. and Canada. They have a growing online presence as well as the Nordstrom Rack discount stores. They have a private label credit card through Nordstrom FSB, a federal savings bank and two Nordstrom Visa car offerings. As of February they operated 323 stores in 39 states in addition to Canada and Puerto Rico. The company was founded in 1901.

This is a really strange bullish recommendation since 61% of analysts (19 out of 31) have a hold rating and three have a sell rating as of February 22nd. So far in March two new analysts have initiated coverage with a sell rating. The consensus price target is $52.75 and shares closed today at $58.22.

Apparently investors are ignoring the analysts ratings because they think they have it wrong. With all of those negative ratings there are probably a lot of shorts that are cussing as each day goes by with another gain.

The analysts with buy ratings claim Nordstrom's mix of brick and mortar stores and online websites as well as their chain of discount and clearance stores will power the earnings higher in the months to come. Cowen & Company said "Going forward, we believe leveraging Nordstrom's unique multi-channel approach should benefit the top-line given that multi-channel customers spend three-to-four times more than other customers." Stifel wrote, "We do believe that Nordstrom is a market share gainer in what will likely prove to be a contracting market for apparel sales. With its best-in-class omnichannel experience, outstanding customer service and compelling merchandise assortments, both broad and deep, we believe Nordstrom can be a winner despite the more challenging environment.

In late February the company reported earnings of $1.17 and revenue of $4.19 billion that missed estimates for $1.22 and revenue of $4.22 billion. However, revenue did increase 5.2% and same store sales rose +1%. They guided for full year 2016 for revenue to rose 3.5% to 5.5% and earnings in the range of $3.10 to $3.35. Analysts were expecting $3.37. Nordstrom said the weak sales were the result of acquisition expenses, the strong dollar deterring tourist sales and the weak holiday season.

Shares fell to $46 on the news. However, that was the bottom and shares have only been down four days since those earnings. The close today at $58.22 was above strong resistance at $57.75. Since then they have declared a quarterly dividend of 37 cents payable on March 22nd to holders on March 7th.

Earnings May 12th.

I am recommending this as a breakout play with today's close over resistance at $57.75 and the next material resistance at $67. However, just to be cautious I am putting an entry trigger on the play at $58.75. I have been burned several times lately by one day wonders that spike slightly over resistance only to fall back again for a week or two.

With a JWN trade at $58.75

Buy July $62.50 call, currently $1.95, initial stop loss $55.25.


NEW DIRECTIONAL PUT PLAYS


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