What Happened?
Shares of department store chain Kohl’s (NYSE: KSS) fell 5% in the morning session after analyst commentary from JPMorgan Chase & Co. highlighted significant downside risk, puncturing momentum from a recent meme-stock rally.
The investment bank raised its price target on the retailer to $10 from $8 but maintained its 'underweight' rating. This new target implied a potential downside of over 21% from the stock's trading price, signaling a continued bearish outlook. The negative sentiment came after the stock had surged more than 33% in the prior week. That rally was attributed to a short squeeze driven by retail investors rather than an improvement in the company's financial health. Kohl's fundamentals remained challenged, as the company had recently reported a 4.1% year-over-year revenue decline and guided for a sales decrease for the full year.
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What Is The Market Telling Us
Kohl’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 16.4% on the news that the stock gave back a significant portion of the previous day's massive gains, which were driven by a meme-stock-style trading frenzy.
The department store retailer's stock had soared 38% the previous day in the absence of any company-specific news, a surge attributed to retail investors on social media platforms targeting the heavily shorted stock. Nearly half of Kohl's available shares were held by short sellers, making it a prime candidate for a "short squeeze," where rising prices force bearish investors to buy shares to cover their positions, further fueling the rally. However, the speculative momentum appeared to wane on Wednesday. The stock's fundamentals remained a point of concern for investors, with the company having previously guided for a decline in same-store sales for fiscal 2025 and facing ongoing leadership uncertainty.
Kohl's is down 10.2% since the beginning of the year, and at $12.60 per share, it is trading 41.8% below its 52-week high of $21.66 from July 2024. Investors who bought $1,000 worth of Kohl’s shares 5 years ago would now be looking at an investment worth $621.30.
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