Tumbling to a price of $18.75 during today's afternoon trading session, shares of Nordstrom, Inc. are now -19.56% below their average target price of $23.31. Does this mean the stock will reverse course? Analysts are giving JWN an average rating of hold and target prices ranging from $12 to $30 dollars per share.
With a short interest of 20.2%, we can infer that the market sentiment on Nordstrom is negative. Each short position represents an investor's expectation and hope that the stock's price will reverse its present course and start falling.
When a stock is sold short, it means an investor has borrowed shares of the stock from their broker, and then sold them at the going market price. The investor hopes for the price to decline, so that they might buy those shares back at a lower price in the future. Once they do, they can return the borrowed shares to their broker, and keep the profit they made on the transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of Nordstrom, institutional investors own 61.1% of the shares, which indicates they have a very high stake in the company. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in JWN, it probably means they believe it is a solid investment choice.
But it could also mean they are buying up shares in an effort to acquire the company or to get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Reviewing the analyst coverage of a stock as well its short and institutional ownership percentages gives a glimpse of what the current market sentiment is on Nordstrom. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
At a glance, here are some essential statistics you may want to know about JWN:
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It has a trailing 12 month price to earnings (Eps) of $2.3 per share
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Nordstrom has a trailing 12 month Price to Earnings (P/E) ratio of 8.2 while the S&P 500 average is 15.97
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The company has a Price to Book (P/B) ratio of 5.1 in contrast to the S&P 500's average ratio of 2.95
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Nordstrom is a Consumer Cyclical company, and the sector average P/E and P/B ratios are 24.27 and 3.23 respectively
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