These 2 retailers might be trading at their lowest levels in a decade, but one analyst says they’re worth a look now.
It has been a rough few years for retailers as the shift to online shopping has wreaked havoc on brick-and-mortar shops.
There have been several big-name bankruptcies and thousands upon thousands of store closures, and there’s little sign that the carnage is going to let up any time soon.
Beyond the shift to online shopping, retailers have been struck more recently by rising tariffs from the U.S.-China trade war as well as rising gas prices.
But as the sector continues to struggle, shares of some retailers are on sale and one analyst says now may be the right time to buy two of them.
Nordstrom (NYSE: JWN), Ralph Lauren (NYSE: RL), and Urban Outfitters (NASDAQ: URBN) are all trading at their lowest multiples in the last decade.
Such a low forward multiple pushed Atlantic Equities to upgrade Ralph Lauren stock to Overweight on Tuesday, saying the current valuation presents “a good opportunity to buy into a high quality brand.”
But all three of these stocks have underperformed the market so far this year. Nordstrom is down the most of the three at -31% so far this year, while Ralph Lauren is down -10%, and Urban Outfitters is down -25% year-to-date.
“It’s obviously a long-term downtrend for most retailers so that disadvantages them relative to the broader market, which of course is in a long-term uptrend,” said Fairlead Strategies founder Katie Stockton. “I always believe in trend following, so generally speaking, I would avoid stocks that are in long-term downtrends.”
Stockton said, however, that sometimes a stock in a downtrend can deliver a counter-trend opportunity as it reaches oversold territory and momentum starts to provide some relief.
“I would take a look at Nordstrom and also Urban Outfitters,” Stockton said. “Both have small short-term basing phases in place, look on the verge of advancing from those basing phases.”
“I would highlight Urban especially as having a higher low relative to a couple years ago, which makes it a bit more promising than Nordstrom having made a lower low relative to that 2016 low,” Stockton said. “Urban Outfitters does have the potential for a more longer-term reversal here. We just need to see a little bit of follow through.”
On the flip side, the managing director at Vios Advisors at Rockefeller Capital, Michael Bapis, warned that investors shouldn’t expect the fundamentals of these stocks to push for longer-term gains.
“We’re cautious on the space,” Bapis said. “A lot of these companies loaded up on inventories prior to the tariff wars and trade wars, and I think they’re getting stuck with how do they sell it? We don’t think they’re primed for a return anytime soon.”