Citi's analyst Paul Lejuez believes that Kohl's is at a turning point, noting that the retailer is generating attractive free cash flow despite facing operational challenges and a tough competitive environment. The upgrade from neutral to buy, along with an increased price target from $14 to $22, reflects a 53% upside potential based on recent trading prices.
Kohl's has struggled with declining sales over the past few years, with its stock losing about 70% of its value in the last five years. However, the company recently reported its best quarterly comparable sales in four years, leading to a 20% increase in share price following its first-quarter earnings report.
Lejuez emphasizes that Kohl's free cash flow, which reached $1 billion last year, is a critical factor that investors should consider. Citi forecasts that Kohl's will generate free cash flow nearly equal to its current market cap of approximately $1.6 billion by 2026 and 2027.
This optimistic outlook contrasts with the broader Wall Street consensus, where only two out of 14 analysts recommend a strong buy on the stock, while seven suggest holding and five recommend selling