Target is one retailer whose share price has benefited from the market chatter. The retail rumor mill was abuzz this week with speculation that activist investor Bill Ackman was putting pressure on the company to spin off its credit card division. Neither Target nor Ackman will comment on the possibility of a sale.
Still, Target shares rose to $68 from $63 a share despite the skepticism of analysts like Citigroup’s Deb Weinswig who says that while a divestiture of Target’s credit card business could expand the stock’s PE multiple, she thinks that a sale is unlikely. While the rumor has not been substantiated, the possibility of sale has boosted Target's share price by about $7.
JP Morgan analyst Charles Grom has an "overweight" rating on Target shares, but due to the recent runup he is recommending investors take profits now. This is partly due to the fact that the company has guided its June same-store sales to come in at the low end of the 3% to 5% range.
“The stock had a nice run on the credit card rumor so it is probably long in the tooth in the $65 to $70 range,” Grom said.
He also thinks Macy’s and BJ’s Wholesale have benefited from the retail rumor mill.
Grom expects BJ’s CEO is dressing up the company for sale this year or early next year. However, he said Macy’s is unlikely to become an LBO target.
Meanwhile, Weinswig said a leveraged buyout of Macy’s is “possible, but not probable.”
The company has not commented on the rumors that Sears Holdings Chairman Eddie Lampert may try to acquire Macy’s, but the share price has climbed the past three Fridays on speculation that it is a target. That boost is countering negative pressure from Macy’s own weak same-store sales reports.