After heading into what seemed to be a free fall over the six months, Hudson’s Bay Company (TSX:HBC) has actually gone in a positive direction since the end of January. The stock rose almost a dollar from about $7.50 per share to $8.50 and seems to be holding steady around $8 per share.
With good news on the table, is it perhaps time to buy this stock before it blows up?
Getting real with real estate
The positive position on the markets is in part from the news that HBC has closed its real estate transaction with SIGNA Prime Selection for $375 million. HBC signed the deal on the 18 German properties last month when the two companies decided to combine retail operations and form a real estate joint venture. HBC said it would use the funds to reduce its borrowings.
Then, of course, there was Lord & Taylor. The flagship building on Saks Fifth Avenue in New York City has been sold, but the property investors have stated they will converting the $163 million they got from the sale into an equity interest in the building, which will be held by HBC through another joint venture structure once the store is closed.
All this recent news has come in a wave of real estate transactions for HBC. Last year alone, HBC formed a joint venture for HBC Europe, sold its Gilt brand, which was proving unprofitable online, and will continue to close up to 10 Lord & Taylor stores.
But is it enough?
Future funds
So it’s true that HBC’s stock hasn’t been doing well. The stock is trading at around $8, as I’ve mentioned, far and away from its five-year high of about $28.50 per share.
Yet over the next year there is a bit of optimism. Analysts are saying the stock could rebound to around $10.50 to $12 per share, and is definitely undervalued where it sits now. It should be around $11 per share.
It seems this stock price has been stuck due to the last quarterly earnings results on December 5. The news was less than hopeful, with the company reporting a net loss of $164 million or 69 cents per share.
It seemed the stock would start trending up again when news that HBC executive chairman Richard Baker would be picking up another 8% stake in the company. His company, Rupert of the Rhine LLC, will acquire 18 million shares from a subsidiary of the Ontario Teacher’s Pension Plan Board for $9.45 a share. This, of course, got investors excited. But not for long, it seems.
Other investors and analysts are still critical of HBC and believe that the company should be pushing more in the real estate market. They believe this is the only way for the company to reward shareholders for their continued loyalty.
Bottom line
Those analysts are right. Real estate is the future for HBC, but it definitely won’t be off the table anytime soon. HBC’s CEO Helena Foulkes has said “everything is on the table in terms of increasing value for our shareholders,” which could include more real estate ventures in the future.
In the short term, it’s a good idea to buy the stock if you want to sell it by the end of the year, but over the long term, its outcome is just too uncertain.
For now, this stock has a lot of proving to do. Analysts don’t recommend selling, but they certainly aren’t saying to buy it either. Hudson’s Bay needs to prove it can be profitable again before the stock could trade any higher.
