The firm also upped its price target to $45 from $40 on shares of the Cincinnati-based department store.
Deutsche Bank said that investors are "underestimating" Macy's recovery potential, adding that the firm "remains conservative on apparel same-store sales and real estate which could provide further upside."
Macy's valuation is attractive and the company should "regain earnings momentum" before its competition does, the firm noted.
Additionally, the company's gross profit margins could surprise to the upside, according to Deutsche Bank.
The firm downgraded department store operator Nordstrom (JWN) to "hold" from "buy" earlier today, cutting its price target to $56 from $57.
Separately, TheStreet Ratings objectively rated Macy's stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author.
TheStreet Ratings rated this stock as a "hold" with a ratings score of C.
The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, generally higher debt management risk and disappointing return on equity.
You can view the full analysis from the report here: M