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A top Wall Street analyst just made an extreme call on Macy's stock

Brian Sozzi

One telltale sign that a publicly traded retailer could be headed for some dark days: a well-regarded, veteran Wall Street analyst completely removes their price target on the stock in question.

And on that note, it’s not a happy Friday (or a happy two weeks) for Macy’s (M). Guggenheim Securities retail analyst Robert Drbul — a longtime sector analyst — downgraded his rating to Neutral on Macy’s stock on Friday... but removed his $20 price target entirely. The move is akin to saying the fundamentals of Macy’s are so in question, it’s unclear where the stock price could go in the months ahead.

“While we respect management's attempts to move fluidly in the ever-evolving retail environment, we no longer see the secular headwinds facing the company abating,” Drbul wrote in his note to clients.

“Overall, while we continue to believe the company has attractive real estate assets, we are moving to the sidelines on the shares,” added Drbul. “While we would welcome additional store closures and further debt pay down, with tariffs looming large, we have limited visibility into M’s ability to sustain and/or grow earnings in 2020 (ex. asset sale gains).”

Macy’s stock fell 3.5% on the downgrade.

To say Macy’s deserved Drbul’s actions is an understatement.

A woman holds a Macy's card in New Orleans. Macy's is lowering its annual earnings guidance after the department store struggled with a big earnings miss during the second quarter as it was forced to slash prices on unsold merchandise. (AP Photo/Jenny Kane)

Macy’s reported second-quarter adjusted earnings of 28 cents a share earlier this month, missing analyst forecasts for 45 cents a share. Earnings plunged from 70 cents a year ago. Same-store sales rose a meager 0.3%. Full-year earnings guidance was slashed to $2.85 to $3.05 a share from $3.05 to $3.25 previously.

Executives had a litany of excuses for the poor showing on earnings day, ranging from ineffective inventory planning to weak international tourism trends at its top stores.

The stock is down about 30% in August, as investors digested what could be a rough holiday season for the retail icon. Over the last year, the stock is down more than 60%.

But judging by Drbul’s analysis, the blood-letting is far from over for Macy’s.

Brian Sozzi is an editor-at-large and co-host of The First Trade at Yahoo Finance. Follow him on Twitter @BrianSozzi

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