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Myer share price rockets on broker upgrade news

One of the best performers on the All Ordinaries index on Wednesday has been the Myer Holdings Ltd (ASX: MYR) share price.

The department store operator’s shares have charged as much as 9% higher to 59 cents this afternoon.

Why is the Myer share price charging higher today?

Investors have been scrambling to get hold of the retailer’s shares on Wednesday following the release of a broker note out of Ord Minnett this morning. And as you might have guessed from the share price reaction, this was a reasonably bullish broker note.

According to the note, Ord Minnett has upgraded Myer’s shares to an accumulate rating and lifted the price target on them materially to 70 cents.

Even after accounting for today’s strong gain, this price target still implies potential upside of almost 19% for its shares over the next 12 months.

Why did Ord Minnett upgrade Myer’s shares?

Ord Minnett made the move on the belief that Myer will deliver a strong full year result when it releases its numbers tomorrow.

Whilst its analysts have forecast a small decline in sales, they expect it to post underlying net profit after tax growth of 9.5% to $35.6 million. This is expected to have been driven by improving margins thanks to its focus on profitable sales

Looking beyond this result, Ord Minnett is pleased with the way management has optimised its product range and expects this to support sales and improve gross margins in the future.

Should you invest?

This certainly is a brave call by Ord Minnett, but I think it could well prove to be the right one.

However, buying shares ahead of a results release is very risky. In light of this, I would suggest investors wait for its results to be announced before considering an investment.

In the meantime, I would be a buyer of fellow retail shares Baby Bunting Group Ltd (ASX: BBN) and Super Retail Group Ltd (ASX: SUL).

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Super Retail Group 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 Scott Phillips.

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