Target Reports Solid Earnings, Teams Up with Vineyard Vines

Target (Ticker Symbol: TGT) released its quarterly earnings and guidance report before the bell on Wednesday. The retail giant reported solid earnings led by an increase in online sales.  Target reported an earnings per share beat of $1.53 vs. Wall Street analysts’ expectations of $1.43 per share. Revenue was better than expected as well, coming in at $17.63 billion vs. Wall Street analysts’ expectations of $17.52 billion.  Same-store sales also beat expectations up 4.8% vs. expected growth of 4.2%.

Target generated some attention earlier this month with the launch of its limited edition lines of apparel and accessories from the Vineyard Vines brand. The new items hit stores this past weekend on May 18th and it was reported that shoppers were showing up at some stores ahead of the opening hours. The collaboration with Vineyard Vines consists of clothing, accessories, swimwear, outdoor goods, and pet gear.  The items are priced in a range from $2.00 to $120.00, but most items are priced below $35.00. Target stated that the Vineyard Vines collaboration has been “one of the most successful brand collaborations” it’s ever done and the results should show up in their next quarterly earnings report.

Target’s stock had a neutral start in 2018, trading in a 6-month trading range between the $68.00 and $78.00 dollar prices levels. At the beginning of the third quarter, Target’s stock finally broke out from that range, rallying over 15%, 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 the fourth quarter of 2018, the stock bottomed, forming a bullish divergence pattern, as indicated on the chart by the purple circles with arrows, where the stock makes a lower low in price but the Relative Strength Index makes a higher low. Target has had a tremendous start to 2019, rallying as high as 29% in the first four months.  Target’s stock has pulled back slightly from the highs of the year but has had a positive move higher today, gapping up over 6% on the news from its earnings release. Currently, the stock is 15% away from its all-time high it made last year.

(Chart above courtesy of ​​)

Based on a survey of 14 analysts offering 12-month price targets, the average price target for Target’s stock is $86.80. 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 $78.65.

Department stores, in general, in the U.S. are struggling lately and have been taking steps towards reducing store sizes, adding delivery options, and buffing up their online services. By doing this, the hope is to wow customers and win over sales.   Clearly, Target has been making steps in the right direction. Investors in the space should look to Costco’s earnings on May 30th for fresh news within the sector.

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