A Fresh Look at Macy's (M) Valuation as Investor Optimism Builds

Macy's (M) shares edged slightly lower on Monday, giving back some gains from the past month after the stock outperformed the broader retail sector. Investors appear to be watching for signals of changing consumer demand as summer progresses.

See our latest analysis for Macy's.

Despite some recent volatility, Macy's share price return stands out, with a 23.9% rally over the past month and a 54.8% climb in the last quarter. Momentum has clearly picked up, building on underlying optimism after a year when total shareholder return reached 42.6%. This is evidence that the turnaround story is still alive, even as the sector faces its own setbacks.

If Macy's run has you watching for the next mover, now is a great time to broaden your search and discover fast growing stocks with high insider ownership

Yet with shares now trading well above recent analyst targets, the question for investors is whether Macy's is undervalued based on fundamentals, or if the market has already factored in all expected gains. This may leave little upside from here.

Most Popular Narrative: 16.3% Undervalued

With Macy's shares closing at $20.45 and the narrative’s fair value set at $24.43, there is a notable gap between market price and this calculation, prompting closer attention to what is fueling such optimism in the projection.

Macy’s owns significant real estate that can be sold to provide liquidity, pay down debt, and finance new investments. The firm intends to raise about $600 million-$750 million from real estate sales over the next three years.

Read the complete narrative.

How does an iconic department store get valued like a future growth story? Julio’s projections lean heavily on strategic asset sales, digital monetization, and profitability drivers most investors have not considered. Where does all this optimism come from? The real secret behind this valuation is rooted in expectations for what Macy’s can unlock from its balance sheet and online presence. These are numbers that might surprise you in the full narrative.

Result: Fair Value of $24.43 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, sustained margin pressure or a lack of concrete takeover interest could quickly challenge the thesis and lead investors to reconsider Macy’s upside.

Find out about the key risks to this Macy's narrative.

Another View: DCF Model Challenges the Bull Thesis

Taking a different approach, the SWS DCF model paints a less optimistic picture for Macy's. According to our DCF estimates, the current share price sits above what we see as fair value. This suggests the market may be pricing in more upside than the company’s cash flows support. Could investor sentiment be outpacing fundamentals?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Macy's for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 872 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Macy's Narrative

If you have a different perspective or want hands-on insight, you can dive into the data yourself and craft your own narrative in just a few minutes. Do it your way

A great starting point for your Macy's research is our analysis highlighting 4 key rewards and 3 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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