Deutsche Bank Expresses Caution on Macy's

Deutsche Bank analysts maintained their Hold rating on Macy's (NYSE:M) with a price target of $14.00, amidst recent market developments. Macy's shares surged 19% on Dec 11 following news that the department store received a buyout proposal from investor groups Arkhouse Management and Brigade Capital Management.

The offer is at $21 per share, valuing the company at approximately $5.8 billion, representing a more than 20% premium over the closing price on Dec 8.

The analysts noted that the proposed deal values Macy's at slightly over a 4.0x fiscal 2023 EV/EBITDA (Enterprise Value/Earnings Before Interest, Taxes, Depreciation, and Amortization) multiple. This is compared to its current valuation of 3.6x as of Dec 8 and a 5-year average of 4.1x. In a historical context, before the pandemic, Macy's traded at an average EV/EBITDA multiple of 5.5x over five years and 5.1x over three years.

Despite the offer, the analysts expressed skepticism regarding the completion of the deal at the proposed price. However, they suggest that potential buyers might be willing to finalize the deal at a higher price. This is considering the potential value in Macy's multi-brand portfolio and real estate ownership, despite the company's recent market share losses and the challenges in asset monetization in recent years.