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  • Earnings

Is Target’s share price set for another retail bounce?

Is Target’s share price set for another retail bounce?

Target’s [TGT] share price got off to a rough start at the beginning of 2020, gradually falling throughout January and February before reaching its lowest close of 2020 on 25 March of $91.04 — down 28.9% year to date. Although Target’s share price has recovered since then, will the company’s third-quarter earnings, due 18 November, carry the stock even higher?

Although Target’s share price showed signs of recovery in the spring, closing at $125.20 on 18 May, it was still down 2.35% year-to-date. It wasn’t until mid-summer that Target’s share price began trading above its 2020 opening price of $128.74 when, on 4 August, the stock closed at $130.45.

Since then, however, Target’s share price has gone on to soar to new heights, without falling below its 2020 opening price. On 13 October, Target’s share price reached an all-time high of $166.68 during intraday trading, before closing at $165.64 — marking the stock’s best-ever close and a growth of 29.19% year to date.

 

 

How has Target been performing?

When Target announced its second-quarter results on 19 August, it posted earnings of $3.38 per share, beating the Zacks consensus estimate of $1.64 per share by an impressive 106.10%. Not only did this mark the fourth consecutive estimate-beating quarter, but the results also signified a growth of 85.71% year on year.

$22.98billion

Target's Q2 revenue - a 27.45% YoY rise

Revenues grew 24.75% year on year from $18.42bn to $22.98bn, beating the Zacks estimate by 13.54%. Of the last four quarters, this was the third time that Target beat revenue estimates.

“Our second-quarter comparable sales growth of 24.3% is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model,” said chairman and CEO Brian Cornell in a statement released alongside the results.

“Our second-quarter comparable sales growth of 24.3% is the strongest we have ever reported, which is a true testament to the resilience of our team and the durability of our business model” - Target CEO Brian Cornell

 

Target’s share price grew 12.65% on the day it released its second-quarter earnings, closing at $154.22. At the time, this marked a record high for the stock.

Looking ahead to its third-quarter results, Target is expected to announce earnings of $1.53, which would mark a growth of 12.5% from 2019’s third-quarter earnings. On the other hand, revenues are expected to total $20.68bn, up 10.77% from the prior-year quarter.

For the full-year, Wall Street analysts are projecting earnings of $7.18 per share and revenues of $87.94bn. If correct, these figures would represent respective growths of 12.36% and 12.58% year on year.

$20.68billion

Target's expected Q3 revenue - a 10.77% YoY rise

Is Target a Buy?

“This year, the COVID-19 pandemic lit a fire under Target's online and brick-and-mortar stores. In the first quarter, its total comps jumped 10.8% and its digital comps surged 141%. In the second quarter, its total comps rose 24.3% as its digital comps soared 195%,” Leo Sun, wrote in The Motley Fool.

Meanwhile, Jefferies analyst Stephanie Wissink initiated coverage of Target’s share price in October with a Hold rating and an increased price target of $180, up from $169, reports The Fly. This suggests a potential 3.66% upside on Target’s share price as of 17 November’s close.

“This year, the COVID-19 pandemic lit a fire under Target's online and brick-and-mortar stores. In the first quarter, its total comps jumped 10.8% and its digital comps surged 141%. In the second quarter, its total comps rose 24.3% as its digital comps soared 195%” - Leo Sun

 

Among 28 analysts polled by CNN Money, the consensus is to Buy the stock. This comes from a majority of 15, while two rate the stock as Outperform nine rate it a Hold and two give it a Sell rating. Meanwhile, Zacks has a consensus Buy rating on Target’s stock.

Among 25 analysts offering 12-month forecasts on CNN Money, the median target for Target’s share price is $175, with a high estimate of $193 and a low of $127. The median estimate would represent a 7.34% increase on Target’s share price as of 17 November’s close.

“Target's scale and forward-thinking strategies should help it outperform the S&P 500,” concludes Sun. “It also generates nearly all of its revenue in the US — which could partly insulate it from the ongoing US-China trade war and other geopolitical risks. In other words, Target should remain a great stock to ‘buy and forget’ for long-term investors.”

Disclaimer Past performance is not a reliable indicator of future results.

CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.

The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.

CMC Markets does not endorse or offer opinion on the trading strategies used by the author. Their trading strategies do not guarantee any return and CMC Markets shall not be held responsible for any loss that you may incur, either directly or indirectly, arising from any investment based on any information contained herein.

*Tax treatment depends on individual circumstances and can change or may differ in a jurisdiction other than the UK.

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