Myer had their AGM on Friday and it seems the meeting caught short sellers on the hop. That’s the view of Ric Spooner, chief market analyst at CMC Markets in Sydney.
Spooner said Myers AGM “produced more evidence that its turnaround strategy is not only well conceived but is being effectively implemented”.
“This evidence came in the form of the latest quarterly sales figures and outlook comments on Friday. Myer’s comparable store sales were up 1.6%, beating David Jones. Department store retailing is a difficult industry with plenty of structural and cyclical issues. However, Myer’s growth outlook seems better than many had given it credit for and the stock is in the process of being rapidly re rated after Friday,” he said.
And he believes that “13 times forward earnings would not seem unreasonable” as a price target “given the ongoing turnaround strategy and that would imply a share price of about $1.30”.
But prices could shoot higher he suggested given that 17.5% of the stock was short sold going into Friday’s AGM. That, and “Friday’s big trading volume of 28.2m shares tells us these positions are being unwound,” he said.
That means if this is a classic short squeeze then the shorts will likely scramble to cover leading to “short sellers pushing prices temporarily beyond fair value to cover their position,” he said.
A short time ago the market was betting Spooner is right and Myer was trading at $1.2150, up another 2.1% from Friday’s close when Spooner wrote the note.
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