Should You Buy Myer Shares Now?
What Happened to Myer Holdings Ltd’s Share Price?
Shares in retailer Myer Holdings Ltd [ASX:MYR] rose by nearly 5.3% today, bucking the trend of a weak Aussie share market. Today’s price action continues the positive trend from yesterday, when Myer’s stock price flew by a massive 8.8% on strong trading volume. Myer shares remain a long way down from where they’ve traded at virtually any time over the past five years.
Why Did This Happen to MYR Shares?
Investors are tipping that Myer’s terrible March was as bad as it can get for the retailer. The month saw CEO Bernie Brookes fall on his sword shortly before Myer announced lacklustre profits for the half-year ending 24 January 2015.
Since then, media reports have suggested retail supremo Solomon Lew may consider lobbing a takeover offer for the embattled company. A deal would almost definitely come at a premium to the current share price, and that gave MYR a huge boost yesterday.
With chatter about cost-cuts crossing the market today, plenty of investors are viewing this stock as a bargain. That’s why its price is rising.
What Now for Myer Holdings Ltd?
Myer still needs an overhaul to have any real hope of generating shareholder value. The company was late to the game on online retail, and its earnings have been shrinking for years.
With local competitor David Jones Ltd now in the hands of a stronger international player, it’s distinctly possible that Myer’s fortunes could get worse before they get better. It would take a brave investor to hold on to Myer shares in this environment.
That means you should approach an investment in Myer with caution right now. But if you have a high tolerance for risk, you should take note that Myer shares are cheap, hated and in an uptrend — three factors I love to see in value stocks.
Wouldn’t you prefer to invest in Aussie stocks that offer stronger potential profits without the painful corporate cost-cuts? Go here to find out more.
Cheers, Tim Dohrmann
Small-Cap Analyst, Australian Small-Cap Investigator