Revealed! A Secret Reason to Buy Macy's Stock

Parkev Tatevosian, CFA provides an analysis of Macy's, a stock that has significantly outperformed in the portfolio of Parkev Tatevosian, CFA since the pandemic. While acknowledging that Macy's is not a growth company and faces stiff competition from off-price retailers like TJ Maxx and Ross, Parkev Tatevosian, CFA believes management is making the right moves by closing underperforming stores and right-sizing the business. Parkev Tatevosian, CFA notes that revenues have declined from $27 billion to $22.7 billion, but emphasizes that the business is still generating positive, albeit volatile, operating profits.

The primary thesis presented by Parkev Tatevosian, CFA is the massive, undervalued real estate portfolio held by Macy's. Parkev Tatevosian, CFA explains that many of Macy's 700-800 locations are owned outright and carried on the balance sheet at near-zero book value due to accounting depreciation, despite having market values that have appreciated significantly over decades. Parkev Tatevosian, CFA highlights that a previous $5 billion offer for these assets nearly rivals the company's entire $6.2 billion market capitalization, providing a significant margin of safety.

In terms of valuation, Parkev Tatevosian, CFA conducted a discounted cash flow analysis and determined a fair value of approximately $29 per share. Given the current trading price of $23.83, Parkev Tatevosian, CFA sees a 23% upside over the next 12 to 18 months. Parkev Tatevosian, CFA concludes that the combination of stabilized operations and the "hidden" real estate upside makes the stock a continued hold and an attractive opportunity for investors.