Retail Stocks Pushed Higher in Black Friday Spree

NEW YORK (TheStreet) -- There were no discounts on Wall Street as investors' shopping spree on retail stocks pushed share prices higher. J.C. Penney  (JCP), Macy's (M) and Barnes & Noble (BKS) were rallying ahead of the Thanksgiving break. E-commerce giants eBay (EBAY) and Amazon (AMZN) joined the party in time for Cyber Monday, the biggest online shopping event of the year.

Barnes & Noble led the pack, adding 8% to $16.69 and rebounding from losses a day earlier. The bookstore retailer reported lower-than-expected earnings on Tuesday, but a new e-reader, Nook Glowlight, and reinvented store experience could increase foot traffic over the shopping season. 

Embattled retailer J.C. Penney surged 7.7% to $10.08, despite the absence of company news. The department store chain has risen incrementally over the month as investors grow more confident a turnaround attempt can take root. 

Macy's, a consistent performer during the holiday shopping season, climbed 1.1% to $53.54. Jim Cramer and Stephanie Link added 300 shares of Macy's to their Action Alerts Plus portfolio on Wednesday morning, on the view the company "has kept costs lean and reworked its merchandise, and it has e-commerce upside."

The brick-and-mortar retailers weren't the only ones getting snapped up. eBay and Amazon were both trading higher, the former up 1.1% to $49.30 and the latter gaining 1.3% to $386.49.

TheStreet Ratings team rates J.C. Penney Co as a Sell with a ratings score of D. The team has this to say about its recommendation:

"We rate J.C. Penney Co a SELL. This is driven by several weaknesses, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its feeble growth in its earnings per share, deteriorating net income, generally high debt management risk, disappointing return on equity and poor profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The debt-to-equity ratio is very high at 2.12 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company. Along with this, the company manages to maintain a quick ratio of 0.36, which clearly demonstrates the inability to cover short-term cash needs.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Multiline Retail industry and the overall market, J.C. Penney Co's return on equity significantly trails that of both the industry average and the S&P 500.
  • The gross profit margin for J.C. Penney Co is currently lower than what is desirable, coming in at 29.47%. It has decreased from the same quarter the previous year. Along with this, the net profit margin of -17.59% is significantly below that of the industry average.
  • Net operating cash flow has significantly decreased to -$737 million or 1502.17% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • J.C. Penney Co has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. Earnings per share have declined over the last two years. We anticipate that this should continue in the coming year. During the past fiscal year, J.C. Penney Co reported poor results of -$4.49 a share vs. -73 cents a share in the prior year. For the next year, the market is expecting a contraction of 34.3% in earnings (-$6.03 vs. -$4.49).

TheStreet Ratings team rates Macy's Inc as a Buy with a ratings score of A. The team has this to say about its recommendation:

"We rate MACY'S INC (M) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, increase in stock price during the past year, growth in earnings per share and increase in net income. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • M's revenue growth has slightly outpaced the industry average of 1.5%. Since the same quarter one year prior, revenues slightly increased by 3.3%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The strong earnings growth this company has enjoyed -- up -- has apparently played a role in driving up its share price by a solid 25.28%. In addition, the rise in the general market has likely contributed to this stock's strong performance during this past year. Regarding the stock's future course, although almost any stock can fall in a broad market decline, M should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Macy's Inc has improved earnings per share by 30.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, Macy's Inc increased its bottom line by earning $3.29 a share vs. $2.91 a share in the prior year. This year, the market expects an improvement in earnings ($3.88 vs. $3.29).
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Multiline Retail industry average. The net income increased by 22.1% when compared to the same quarter one year prior, going from $145 million to $177 million.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. When compared to other companies in the Multiline Retail industry and the overall market, Macy's Inc's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.

TheStreet Ratings team rates eBay Inc as a Buy with a ratings score of A-. The team has this to say about its recommendation:

"We rate eBay Inc a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, growth in earnings per share and good cash flow from operations. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • eBay Inc's revenue growth has slightly outpaced the industry average of 9.2%. Since the same quarter one year prior, revenues rose by 14.3%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Although eBay Inc's debt-to-equity ratio of 0.20 is very low, it is currently higher than that of the industry average. To add to this, EBAY has a quick ratio of 1.67, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $1,334 million or 15.59% when compared to the same quarter last year. Despite an increase in cash flow, eBay Inc's average is still marginally south of the industry average growth rate of 23.76%.
  • EBAY INC has improved earnings per share by 17.8% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, eBay Inc reported lower earnings of $1.99 a share vs. $2.46 a share in the prior year. This year, the market expects an improvement in earnings ($2.70 vs. $1.99).

TheStreet Ratings team rates Amazon.com Inc as a Hold with a ratings score of C. The team has this to say about its recommendation:

"We rate Amazon.com Inc a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, good cash flow from operations and solid stock price performance. However, as a counter to these strengths, we find that the company's profit margins have been poor overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 7.6%. Since the same quarter one year prior, revenues rose by 23.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Net operating cash flow has increased to $1,389 million or 47.29% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of 36.47%.
  • Powered by its strong earnings growth of 85.00% and other important driving factors, this stock has surged by 57.01% over the past year, outperforming the rise in the S&P 500 Index during the same period. Setting our sights on the months ahead, however, we feel that the stock's sharp appreciation over the last year has driven it to a price level which is now relatively expensive compared to the rest of its industry. The implication is that its reduced upside potential is not good enough to warrant further investment at this time.
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly underperformed compared to the Internet & Catalog Retail industry average, but is greater than that of the S&P 500. The net income increased by 85.0% when compared to the same quarter one year prior, rising from -$274 million to -$41 million.
  • The gross profit margin for Amazon.com Inc is currently lower than what is desirable, coming in at 32.53%. Regardless of AMZN's low profit margin, it has managed to increase from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of -0.23% trails the industry average.

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