Target (Ticker Symbol: TGT) announced on Monday that it will be launching a new brand, Everspring, which will have items like candles, dish soap, air freshener, and more. The retailer looks to capture market share in the “clean and natural” product space, where shoppers feel good about buying and aren’t scared to put products on themselves or spray into the air. Target has been actively investing in its own in-house brands like clothing lines, home decorations, and furniture. By having its own brands, Target can go around middlemen, making it possible to have higher profit margins while also being able to set its own prices.
The new Everspring brand will have all of its items like laundry detergent and dish soap, made from plants and renewable agriculture, marine, and forestry materials or are created from recycled items. The scented air fresheners will be made with 100% natural fragrances which the company stated will not be tested on animals. Target has seen an increase in sales of the “natural” products it sells grow by over 10% every year since 2016. Everspring is Target’s brand that is set to help it take advantage of the increased demand from the naturals space.
The new Everspring items will range from $3.00 to $12.00 which is roughly 15% less than comparable items in the marketplace. Target will also label its new Everspring-branded items with a new “Target Clean” icon that was launched earlier this year, indicating that the product is made without commonly used unwanted chemicals. The most common reason people don’t purchase “natural” items is due to higher costs and Target is trying to capture those shoppers.
Target’s stock took off to the races in 2018, rallying over 35% in the first three quarters and trading to an all-time high of $90.39 on September 10th, 2018. The stock proceeded to give back all of its gains from the year, being propelled by a very negative earnings report in the fourth quarter that sent the stock gapping lower. In that same quarter, the stock bottomed, forming a bullish divergence pattern where the stock makes a lower low in price but the Relative Strength Index makes a higher low. (As indicated on the chart by the purple circles with arrows) Traders and investors sometimes look at divergences for a possible pause within the current trend which can, at times, lead to a reversal as occurred in Target’s case.
Target’s stock has had a positive start to 2019, rallying over 25% since January. The stock spent the first two months of the year grinding higher, slowly but steadily, until a very positive earnings release sent the stock higher, trading through its 100 and 200-Day Moving Averages. Target’s stock is currently just over 9% away from its all-time high.
(Chart above courtesy of www.tipranks.com)
Based on a survey of 13 analysts offering 12-month price targets, the average price target for Target’s stock is $83.80. 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 $81.33.
Target is stepping out and trying to find new ways to add revenue streams to its current business model. By the end of the year, Target is expected to have over 25 of its own new brands. Investors should look to Target’s earnings release on May 22nd for fresh news on the retail giant.