Nordstrom Upgraded Pre-Earnings

Seattle-based specialty retailer Nordstrom Inc. (JWN) operates a chain of department and outlet stores. We are upgrading Nordstrom shares from Sell to Hold.

We think that the federal government’s stimulus package could lead to an explosive rally in JWN shares. This is not to say that we have become more bullish on Nordstrom or retailers in general; we have not. We continue to believe that consumer discretionary spending will not return to the levels of the last several years.

In the short term, however, investors will look past longer-term concerns and focus on the trillions of dollars being spent by the government to prop up consumer spending. Our target price is $15, or about 12x our fiscal 2009 EPS estimate. Nordstrom is scheduled to report fourth quarter results on Feb 23.

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