Analysis and estimation of Nordstrom stock value

QIDI ZHOU

Master's thesis

Abstract:

The research results will contain town main part: US stock market trend and JWN stock value estimation. 6.1Predict the U.S. stock market future trend Through the analysis of the U.S. macro-economy, this paper will predict the future trend of U.S. stocks. There are two important factors will determine stock market trend, which is Fed policy and Dollar index trend. As can be seen from the Fed policy, the U.S. economic recovery is generally as follows: Fed loose monetary policy - weakening the dollar index - economic recovery - Treasury yields rebounding - capital returning to the US - the dollar index is stronger - US assets are rising - the economy is back on track. (Kelton, 2016) In the terms of the Fed's massive dollar releasing, the intention is to stimulate the economy. If a chain breaks in the middle, the U.S. economy could fail to recover. And there will be bubble bursts, market crashes and so on. In order to keep the market healthy and the U.S. economy recovering gradully, Fed is bound to be extremely cautious about yield control. The Fed will not impose controls on it. In this case, there is limited risk on the U.S economic recovery. As long as U.S economy hasn’t recovered to the stage before Covid-19, there is very small change that Fed changes their policy. The stock market will remain strong. There is another point that economy needs to pay attention to the Velocity of M1 money stock is still remaining at a very low level. It’s even more crucial for traditional industries such as JWN. Velocity of M1 money stock depends on the economic growth rate and US Money supply growth. As we can see in the figure12&13, M1 Money Stock is remaining in high level. However, Velocity of M1 money is stable in low level. It means family, enterprise and government, none of them are going to consumption. They may spend more on savings, investments or debt repayments rather buying services. Even there is a huge economy stimulation plan, the effect of boosting economy will not very well. In another aspect, big capital could save cash on hand, waiting a correct time to enter the market. In particular, when mass vaccinations begin and the world economy begins to recover, investor may be more inclined to consumption than to saving. It was when Velocity of M1 money stock will catch up. All in all, from both sides Fed policy and Dollar index, there is positive prediction for stock market. It will benefit traditional industry, particular for JWN whose revenue is mainly from Offline entity store. 6.2Estimate JWN stock price In the thesis, Beneish model are used to detect JWN financial fraud possibility. The table 3 has calculate all M-score result from 2018-2021. As we can see that all the Beneish M Score < -1.78. It means JWN’s financial report is very reliable. Company is not likely to have manipulated their earnings. JWN financial fraud possibility is very low. Investor can use those calculation result as reference to make investment decisions. And DCF model are used to estimate JWN future stock value.in theoretical part, we did research on JWN business model and challenge. JWN has been trying to develop B2C before pandemic. New business model will bring JWN revenue to a higher level. On the other hand, Covid-19 settle down just a matter of time. Based on it, we estimate JWN FCFF in the next 5 years and calculate WACC. In the end, we successfully estimate JWN stock value: 34.49$. Based on the above calculations, it is currently recommended to maintain observation. Obviously, JWN stock price has been priced-in their future business development.

Keywords

JWN, DCF, Beneish model, Covid-19, Fed policy, DXY index, Stock price

Jazyk práce: English

Datum vytvoření / odevzdání či podání práce: 31. 3. 2021

Obhajoba závěrečné práce

• Vedúci: doc. Ing. Petr Procházka, MSc. Ph.D.

Czech University of Life Sciences Prague

Faculty of Economics and Management

Master programme / odbor:
Economics Policy and Administration / Business Administration