Target (Ticker Symbol: TGT) announced over the weekend that they would be opening over 20 permanent Disney Stores within their own Target locations. It is one of the many strategies Target is using to lure more customers to come inside its stores. The first stores are set to open on October 4th, ahead of the major holiday season. Target is planning on opening over 20 stores starting in Denver, Chicago, and Philadelphia to name a few locations. The company plans on opening over 40 additional stores by October of 2020, which will be selling toys, games, clothes and more.
To coincide with the launch of the new Disney stores, Target is launching an online Disney-themed shopping experience where customers can find Disney products from Marvel, Pixar, Star Wars as well as other Disney brands. Additionally, Target will be opening a smaller location outside of Walt Disney World Resort in Orlando, Florida in 2021, which will also be heavily Disney-themed.
Disney’s stock was coming out of its first oversold condition in the Relative Strength Index in over 15 months at the start of the year in 2019. Disney’s stock rebounded very well early in the first quarter and notched in a V-shaped reversal in March. The stock gapped up on the initial news of the announcement of Disney+, its new subscription service. The stock rallied over 30% from its lows before finding some resistance around the $147.00 price level. Disney’s stock pulled back and found some support around the $130.50 price level while putting in a Double Bottom reversal pattern. This pattern occurs when the price of an asset reaches a low price, has a small rally then retests that low failing to break below it. The pattern is confirmed once it breaks above the high between the two prior lows – roughly $136.50.
Some traders use what’s called a “measured move” to try and project where the stock might go in the future based on breakouts from technical formations. In Disney’s case, one would take the bottom prices from the bottom of the pattern, (roughly $130.50) the price of the neckline from the pattern, (roughly $136.50.) and then subtract them to get the difference ($6.00). The difference is then projected from the neckline in the direction of the breakout to project the price of the measured move: Neckline + Difference = Measured Move. In Disney’s case, the projected price target from the Double Bottom pattern was roughly $142.50, which it achieved shortly after breaking out from that pattern. The stock proceeded higher and traded to an all-time high of $147.15 on July 29, 2019. Currently, Disney’s stock is finding some price support this month at the $132.00 price level.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 13 analysts offering 12-month price targets, the average price target for Disney’s stock is $156.35. According to that number, the stock is priced at a discount relative to Wall Street’s analysts and could be considered undervalued around current levels near $134.61.
Target is coming off of the heels of a strong quarterly report last week, which sent its stock trading to an all-time high of $106.52. The company is trying to keep the positive momentum going in its direction – especially when one of its biggest competitors is Amazon who seems to continue to gobble up market share. Investors in the space should look to Disney’s next earnings release on November 10th for fresh news within the sector.