Target (TGT) shocked everyone yesterday, or at least they shocked me, when they announced earnings were significantly better than expected.
For the quarter, Target Stores posted per-share earnings that were $0.57 better than the $2.41 expectations set by Wall Street. Improving the data, the company showed year-over-year revenue figures that increased 1.6%. That last number is key because Target’s revenue had been on the decline for two quarters and expected to go lower.
The earnings beat comes as Target emerges from a small reorganization that resulted in an inventory hell situation.
You know how much I love the “trends” and technicals.
Ahead of this earnings quarter, target shares had completed a transition into a long-term bull market trend. The stock moved above its 20-month moving average ($142) for the first time since falling into a bear market in May 2022.
This is where you get to hear something unique…
The analysts on Wall Street have spent the last two years downgrading their outlook and price targets on Target.
Currently, 50% of the 34 analysts covering the stock have it ranked a “Hold” and 47% a “Buy.” The average price target for those analysts covering the stock is $174, just $1 under today’s trading price.
Here’s how this works.
Over the next few weeks, you’ll start to see upgrades from the analyst community as the “holds” upgrade to “buyers” or bulls. At the same time, the target prices for TGT shares will be increased.
There’s nothing that Main Street investors like more than to pile into a stock as the analysts are upgrading it. This means that we’re likely to see the price of Target climb above $200 in the intermediate term and toward $225 over the long term.
Bottom Line
Target’s management appears to have pulled off a nice fundamental turnaround, resulting in the first bull market run for the stock since 2017 when shares were at $55.
From my perspective, the real retail trades are found in the fast-performing specialty names like American Eagle (AEO) and Abercrombie & Fitch (ANF).
That said, names like Target, Walmart (WMT), and my favorite retailer, Costco (COST), make for a good retail investing foundation.
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About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.
