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Macy's stock could rise 27% from here, Citigroup says

Shoppers pay for items at a Macy's store in New York.
Peter Foley | Bloomberg | Getty Images

Citigroup upgraded Macy's to buy from hold on Wednesday, citing attractive valuations, strong cash flow and a 4.3 percent dividend yield.

"Although we do not believe the long-term structural challenges to department stores are likely to go away, M 'gets it', and is doing the right things for the business, which should help alleviate pressures in the medium term," wrote equity analyst Paul Lejuez.

"With an attractive FCF [Free Cash Flow] and dividend yield, we believe the stock has support that makes the risk reward attractive at current levels…" he wrote.