Shares of retailer Kohl’s Corporation (NYSE:KSS) rose more than 6% in early Friday trading after two big-name Wall Street analysts upgraded the stock and raised their price targets.
In quick succession, first RBC Capital upgraded Kohl’s from undeperform to sector perform, and assigned the stock a $60 price target (up more than 50% from its previous target of $39 a share). Then JPMorgan followed suit with its own price target hike of nearly 50% (to $72 a share) and an upgrade to overweight.
Not all upgrades are created equal, however. JPMorgan’s new price target implies that Kohl’s stock still has about 13% more to rise before this year is over — hence the analyst recommendation to buy the stock. RBC, on the other hand, while raising its price target, is setting its bar below where Kohl’s stock trades today.
RBC had kind words to share today, praising Kohl’s for “sequentially improving comps through 2017 which culminated in +7% comp for the Holiday period.” Still, RBC’s price target actually suggests that after Kohl’s run-up of roughly 50% in price over the past year, the analyst might be more inclined to sell Kohl’s stock than to buy it.
JPMorgan was even more effusive in its praise of Kohl’s, calling the stock a “rare large cap value idea.” And yet, if you ask me, that was more true six months ago than it is today.
Today, Kohl’s stock is selling for 14 times trailing-12-month free cash flow and nearly 22 times trailing earnings. Analysts polled by S&P Global Market Intelligence generally agree the company is set up to grow earnings only in the high-single digits over the next five years. Even with a 3.7% dividend yield to support it, I see Kohl’s stock as mostly played out at this point — and no longer a bargain.
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