• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • TheStreet Smarts
  1. Home
  2. / Investing

Target's Earnings: Just Wow!

There is a very good chance that I end up long these shares prior to Black Friday. At least that's the plan.
By STEPHEN GUILFOYLE
Nov 20, 2019 | 10:28 AM EST
Stocks quotes in this article: TGT

The truth is that I can not begin to tell you just how impressed I have become with Target (TGT) , Target CEO Brian Cornell, and the level of execution this firm has attained on a corporate level. Don't get me wrong. I am short the name, but that position was entered into in the pre-opening hours, after the earnings release. If readers have watched the interviews that I have done on a near weekly basis with Katherine Ross of TheStreet, they know that I took my profits in this name in the wake of the firm's second quarter earnings related gap higher. I did that with the intent of buying the position back on a discount that never materialized to a great enough degree.

Yes, as I write this missive, I am short. That is but a trade, as my thought is that the shares may have run too high in the early going. There is a very good chance that I end up long these shares prior to Black Friday. At least that's the plan. As we all know, everyone's plan changes once the first punch is thrown, so we'll see. That said... grab a shovel. It's time to dig in.

The Third Quarter

For the quarter just ended, Target reported adjusted EPS of $1.36, trouncing the Wall Street consensus view of $1.18. The firm posted revenue generation of $18.67 billion, also a beat, and good enough for year over year growth of 4.8%. It gets better. Comparable sales grew 4.5% for the quarter, well above the 3.5% that the industry was looking for. Digital sales (e-commerce) grew 31%, and now comprises 7.5% of total sales. Gross margin improved to 29.8% from 28.7%. Operating margin expanded from 4.6% to 5.4%.

Guidance

Moving forward, Target now expects full year EPS to land in a range spanning $6.25 to $6.45. This is up from the firm's prior guidance of $5.90 to $6.20, and well above the analyst community's consensus expectation of $6.17. CEO Brian Cornell spoke on the firm's immediate future on Wednesday morning. "Looking ahead, we have ushered in the holiday season with an unwavering commitment to guest service that compliments our highly differentiated, value-driven assortment, our exceptional in-store shopping experience as well as an unmatched suite of easy and convenient fulfillment options." In plain language, ... They're killing it.

In a televised interview, also this morning, Cornell added, "Unemployment is low, wages are rising, consumer confidence is strong, and all the indicators right now would say we're looking at a very solid holiday season." Just hear those sleigh bells jingling, ring, ting, tingling. You know it's lovely weather.

To Review

On Wednesday morning, we learned that Target...

1) Beat on Earnings.

2) Beat on Revenue.

3) Crushed comparable sales.

4) Grew Digital sales nicely.

5) Improved margin performance.

6) Raised Guidance.

Other than that, not much to boast about.

On Digital

While the market has rewarded growing sales across digital channels for nearly every retailer able to do so, most that can get this done do so at the expense of margin. Plain and simple. Sale prices tend to be lower in order to be competitive, and getting any package to any given street address increases overhead. Now, Target has been quite innovative here. Included in digital sales would be same day delivery, curbside pick-up, and in-store pick-up. Cornell stresses that while 80% of e-commerce sales require same day service, when the firm is able to fulfill from the back of a store instead of from a regional distribution center, the expense of shipping is reduced by a rough 40%. When customers pick up either at the curb or inside the store, the expense is reduced by 90%. This is where big data, and the ability to anticipate consumer needs comes in.

The Chart

Readers will note the upside explosion to the upside created by the purple ascending triangle, not to mention Q2 earnings. There is some technical danger here to be honest. After this morning's opening surge, these shares now have not one, but two gaps that could fill. I addition, Relative Strength, which had moderated, is now way too high for me to grab any shares at this time. In fact, after I submit this piece I would think that I might add to my short.

That does not mean that I don't like Target. It just means that the shares are up in my mush, and I must admit, that's a challenge that I relish. I don't know where to get long these shares. Former resistance of $110 would be awesome. That level is also unrealistic (I think) before Black Friday, and I will be long these by then. I'll be flat TGT today.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Stephen Guilfoyle was Short TGT equity.

TAGS: Earnings | Investing | Stocks | Technical Analysis | Trading | Consumer | Retail | E-Commerce | Stock of the Day

More from Investing

The Market Huffs and Puffs and Barely Bounces

James "Rev Shark" DePorre
Oct 4, 2023 4:26 PM EDT

Now with the jobs report out later this week, let's see if buyers have sufficient confidence to put more cash to work

Duckhorn's Charts Are Not Vintage Quality

Bruce Kamich
Oct 4, 2023 3:29 PM EDT

Where have all the wine drinkers gone?

Novavax Stock Needs a Booster Shot

Bruce Kamich
Oct 4, 2023 1:37 PM EDT

Let's roll up our sleeves and check out the charts and indicators.

BlackRock's Charts Can Also Crack Under High and Rising Rates

Bruce Kamich
Oct 4, 2023 11:39 AM EDT

Let's check the price to watch for BLK.

5 Factors to Watch in an Oversold Bounce

James "Rev Shark" DePorre
Oct 4, 2023 11:35 AM EDT

If you're stalking a counter-trend upswing in the market, then pay attention to how these scenarios play out.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:13 PM EDT BRUCE KAMICH

    8 Trading Rules from T. T. Hoyne

    You just read the header for this missive and prob...
  • 08:42 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    How Elite Traders Make Big Profits
  • 02:58 PM EDT BRUCE KAMICH

    Classic Trading Rules From Bernard Baruch

    Bernard Baruch listed the rules (below) in his aut...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2023 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login