Is the Myer Holdings Ltd share price in the buy zone after yesterday’s huge decline?

On Monday the Myer Holdings Ltd (ASX: MYR) share price was one of the worst performers on the Australian share market with a massive 9.5% fall to $1.00.

With no news out of the department store operator, the catalyst for this decline appears to have been a research note out of Credit Suisse.

As you might have guessed, it wasn’t a positive one. Analysts at the investment bank downgraded Myer to an underperform rating with a 82 cents price target. Prior to yesterday Credit Suisse had an outperform rating and a $1.44 price target on its shares.

According to the note, its analysts are concerned about the impact that retail behemoths Amazon and TK Maxx will have on its sales, especially considering the weak consumer spending Australia is experiencing.

Should you buy the dip?

After yesterday’s decline Myer’s shares are changing hands at just under 11x trailing earnings.

Whilst this is dirt cheap in comparison to retailers such as Premier Investments Limited (ASX: PMV) and Greencross Limited (ASX: GXL), I’m not sure I would be in a rush to invest in its shares just yet.

I have been very impressed with the work that the retailer has done to turnaround its performance, but the potential arrival of Amazon and the expansion of the TK Maxx store network could undo all of its hard work.

Because of this I would suggest investors hold off an investment for the time being. Unless Premier Investments comes in with a takeover offer, I can’t see its shares climbing meaningfully higher in the next 12 months.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Premier Investments Limited. Motley Fool contributor James Mickleboro has no position in any stocks mentioned. The Motley Fool Australia owns shares of Greencross Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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