×

Buy Macy’s after post-earnings pop?

Macy's shares rose 3 percent after the retailer reported results that beat meager expectations and provided encouraging signals about plans to better monetize the company's real estate. But one market watcher would advise staying away from the beaten-down stock.

"Macy's has a lot of problem," Eddy Elfenbein, editor of the Crossing Wall Street blog, said Tuesday on CNBC's "Power Lunch." "The silver lining is their real estate portfolio. ... But there are a lot more challenges ahead."

For starters, "they won't see sales increase for at least another year," he said.

Indeed, Macy's announced Tuesday that it expects comparable sales to fall "by approximately 1 percent" in fiscal 2016.

The stock has managed a 21 percent rally this year — but only after shedding nearly half of its value in the previous year.

Stacey Gilbert, head of derivative strategy at Susquehanna, said Tuesday on "Power Lunch" that Macy's has become a "headline stock," and as such, options prices have begun to price in bigger expected moves.

The primary such headlines will have to do with Macy's real estate holdings. In January, activist investment firm Starboard Capital urged the department store chain to spin off its real estate holdings in order to "unlock value," and Macy's CEO Terry Lundgren has said the company is "all over" plans to "get value ... without disrupting our business."

Read MoreMacy's is pursuing real estate opportunities: CEO

What will become of those plans has clearly become a big question mark surrounding the stock. Indeed, according to Gilbert, the options market is currently displaying signs of "directional confusion."

Meanwhile, S&P analyst Efraim Levy raised his price target on the now-$42 stock to $43 on Tuesday afternoon, explaining that he is "factoring in what seems like a greater likelihood of unlocking some real estate value."

Disclaimer

Videos

Trades to Watch

Trader Bios

About

Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

Read more

Connect