The Daily Dose: View From the Battleground

 | May 07, 2014 | 10:00 AM EDT  | Comments
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A best friend of mine sent me a text yesterday that read: "Are there three of you?" The reason for the inquiry was all the information supplied on finance -- never overlapping -- on Twitter (TWTR), Facebook (FB) and LinkedIn (LNKD). Even if there were three of me, I wouldn't confirm it; it's best to remain formless, according to a mentor known as Sun Tzu. So in keeping with the litany of things going in my life on any given day, here is a whirlwind tour through Analytical Land.

Watch This on Target

No, this is not a typical talking-head segment. I came to the table with nine years of intimate Target (TGT) coverage under my belt and conversations with clients after the CEO news broke Monday. These are the new wrinkles to the story to ponder.

Canada: There is a real possibility that Target scraps its Canadian operation due to the poor site selection and internal store layouts. Sometimes a dying pig is not healed by putting lipstick on it. For an example of the situation, many Target Canada stores have food on the second floor, completely counter to how people shop.

United States: Target may opt to become more aggressive to clear merchandise for back-to-school season that was ordered and marketed by the previous team. Good for moms on a budget, bad for shareholders.

Next CEO: Target needs a proven industry veteran from outside the company. Now is not the time to bring in an individual that ran a single division at one large company (unless it's the president of Wal-Mart's (WMT) U.S. division, Bill Simon, who could be seeking employment real soon). I really do think Gap's (GPS) present CEO Glenn Murphy would be an ideal fit; he is also Canadian and knows the market quite well from his stint as the leader of Shoppers Drug Mart.

Speaking of retail, in the face of an accelerating U.S. employment market, the S&P Retail Index has been doing squat. Actually, it's lower on the year. I guess those complaining about a dreadful labor participation rate have a chart like this to stand on.

Source: Standard & Poor's

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Chipotle (CMG): Way oversold here. Checks continue (and no, checks are not just me sitting inside a Chipotle counting people in line) to show strong traffic levels literally from open, despite menu price increases being implemented.

Starbucks (SBUX): The stock has been loser's money since Nov. 25, but an upgrade on my end is brewing. Lower Street expectations, solid food attach rates, and new initiatives are a recipe for a better-received quarter upcoming.

Home Depot (HD): We currently rate Home Depot shares a buy with an $80 price target, but I am growing concerned on the risk/reward heading into the first-quarter earnings announcement. Expectations are high. Housing numbers are slowing. Scotts Miracle Gro (SMG) tells us its retail partners went borderline crazy ordering for a delayed spring season (you could see the strong inventory commitments out front of the stores).

Best Buy (BBY): The company continues to bleed executive talent before the first-quarter earnings release. We reiterated our sell rating and $20 price target on the stock this past Monday. Bottom line: There were zero catalysts for Best Buy stores in the first quarter, and that could lead to one further disappointing full-year earnings outlook that derails the stock.

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