Macy's, Inc.

Analysis of Macy's (M)

Technical Outlook M has shown impressive momentum recently, significantly outpacing the market over the past three months. However, trading near its 52-week high after a steep recovery suggests limited short-term upside and increased vulnerability to a pullback. The high beta indicates this stock will likely remain more volatile than the market, which could mean larger swings in both directions.

Fundamental Health The company's fundamentals raise concerns, with declining revenue, shrinking margins, and minimal net profitability. Operational efficiency is weak, as seen in low ROE and slow inventory turnover, while the negative operating cash flow and low quick ratio point to potential liquidity strain. These metrics suggest the core business is facing significant challenges.

Valuation & Risk While the trailing P/E appears attractive, the enormous gap with the forward P/E signals that analysts expect a sharp earnings decline. Combined with a high EV/EBITDA, the stock looks overvalued relative to its near-term prospects. The primary risk remains its high volatility and susceptibility to market downturns, exacerbated by operational weaknesses.

Investment Recommendation Considering M's weak fundamentals, overvalued forward earnings outlook, and proximity to its yearly high, the stock does not present a compelling buy opportunity at this time. The technical strength appears fragile against a backdrop of operational and liquidity concerns. Investors may want to wait for more substantial improvements in profitability or a more attractive entry point before considering a position.

RockFlow Model Forecast: Three Scenarios for 2026

Based on the comprehensive analysis provided, here is a 12-month outlook for Macy's (M):

12-Month Outlook for Macy's (M)

The primary catalyst for Macy's over the next year is its ongoing strategic review, which could lead to significant asset sales or a potential privatization, offering a potential floor for the stock price. However, this is overshadowed by significant risks, including deteriorating fundamentals, potential liquidity strain, and high volatility, making the stock highly susceptible to a sharp pullback if the broader market weakens or corporate action fails to materialize. Given the alarming gap between trailing and forward P/E ratios and the lack of a clear analyst target, the stock appears overvalued at current levels near its 52-week high; a more realistic target price range would be lower, potentially between $15 and $20, representing a retreat to a level that better reflects its challenged earnings outlook.

Wall Street Consensus

Most Wall Street analysts are optimistic about Macy's, Inc.'s 12-month outlook, with consensus target around $22.01, indicating expected upside potential.

Overall, M has investment potential but also faces challenges. Here are key factors to weigh before investing.

M has demonstrated robust recovery strength over the past quarter, significantly outperforming the broader market.

The stock has posted strong gains of 3.11% over one month and 8.75% over three months, substantially outperforming the market by 8.77% during the latter period despite its high beta of 1.525 indicating elevated volatility. This performance suggests positive momentum, though the stock's higher volatility represents increased risk.

Trading at $22.24, M is currently near the upper end of its 52-week range of $9.76 to $24.41, placing it approximately 92% above its low and just 9% below its high. While not at an extreme overbought level, the proximity to the yearly peak combined with the significant recovery from a 36.5% maximum drawdown warrants caution for new entries at current levels.

Revenue & Profitability Revenue declined sequentially from $5.0 billion to $4.9 billion, while margins deteriorated significantly with operating income falling to $42 million (0.9% margin) from $155 million (3.1%). The net profit margin of 0.2% reflects minimal profitability after accounting for higher SG&A expenses and other income expenses.

Financial Health The company maintains a reasonable debt ratio of 31% but shows concerning cash flow metrics with negative operating cash flow per share and cash flow to debt ratio. The low quick ratio of 0.18 indicates limited liquid assets relative to current obligations, though the current ratio of 1.25 remains acceptable.

Operational Efficiency Operational efficiency appears weak with ROE at just 0.25% and asset turnover of 0.29, indicating poor returns and inefficient asset utilization. The inventory turnover of 0.45 and high days inventory outstanding of 199 days suggest slow inventory movement and potential working capital inefficiencies.

Valuation Level: Based on the TTM PE ratio of 11.95, M appears undervalued on a trailing earnings basis; however, the extreme disparity with the forward PE of 118.58 signals significant expected earnings contraction. This negative outlook is further supported by a negative PEG ratio and a high EV/EBITDA multiple of 37.79, which collectively suggest the stock is overvalued relative to its near-term earnings potential.

Peer Comparison: A comprehensive peer analysis is not feasible as industry average data is unavailable. Without these benchmarks, it is impossible to contextualize M's valuation multiples against its sector competitors. Therefore, a definitive conclusion regarding its relative valuation cannot be reached.

Volatility Risk: M exhibits significant volatility risk, with its Beta of 1.525 suggesting it is approximately 53% more volatile than the broader market. This elevated sensitivity is confirmed by the substantial one-year maximum drawdown of -36.5%, indicating a high potential for severe price declines during market downturns.

Other Risks: An absence of reported short interest is noted, which can sometimes imply a lack of negative investor sentiment but does not eliminate fundamental or liquidity risks. However, this particular data point offers no mitigating insight into other potential vulnerabilities, such as company-specific operational challenges or sector-wide headwinds.