Weakness in Target (TGT) may be an opportunity.
Just yesterday, the retail stock plunged after earnings missed the mark, with Q1 profits falling short, even as sales came in above expectations. Unfortunately, the company is taking a hit with freight costs, and lower than expected sales of discretionary items, which also hit WMT.
As reported by Zero Hedge, Target reported:
- Adjusted EPS $2.19 vs. $3.69 y/y, estimate $3.06
- Sales $24.83 billion, +4% y/y, estimate $24.34 billion
- Comparable sales +3.3%, estimate +1.17%
- Operating margin 5.3%, estimate 8.13%
It then lowered its full-year forecast on operating income margins to 6%, instead of its forecast 8%. And, according to CEO Brian Cornell, “We were less profitable than we expected to be, or intend to be over time … it’s clear that many of these cost pressures will persist in the near term. Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time.”
However, the stock may be down too far, too soon.
And analysts such as Raymond James’ Bobby Griffin are suggesting that clients use the pullback as a buy opportunity. “We continue to be buyers on the pullback, and see Target as a long-term winner in today’s retail landscape and believe the company can sustain its recent market share gains across multiple product categories due to its customer loyalty (i.e., F1Q traffic gains), strong brand partnerships (AAPL, ULTA, LEVI etc.), and growing private label penetration,” he said, as quoted by Investing.com.
The analyst has a strong buy rating on the stock, with a price target of $205.
Shares of TGT last traded at $153.20 – down another $8.52 on the day. The stock is also incredibly oversold on RSI, MACD, and Williams’ %R. With patience, the stock could eventually refill its bearish gap around $210 – that is, once the market sell-off cools down.
We also have to consider that crisis often leads to opportunity.