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Target: What I See Coming Next


  • Target will have a chance this week to shake off the February malaise in the markets and head closer to my original price target of $80/share.
  • I believe Target will deliver a minor revenue beat coupled with earnings that should top consensus more pronouncedly in the holiday quarter.
  • I still see a solid return of about 11% per year on this stock over the next 24-30 months, which I find enticing given the quality of the business.

Target (NYSE:TGT) is getting ready to report results of its holiday quarter. This is the company's chance, in my view, to shake off the broad equities February malaise that stopped the retailer's stock from climbing past my previous price target of $80/share.

In terms of expectations, the Street is betting on revenues of $22.5 billion for a YOY increase of nearly 9%, the best growth rate in years -- although benefited this time by an extra week in the fiscal quarter. Non-GAAP EPS consensus of $1.38, if achieved, would be a significant improvement of about 20 cents over the company's own original guidance provided last quarter, at the mid-point of the range.

Credit: WABC TV

On my end, I would be disappointed to see sales fall short of current estimates. Target came out with a solid read on the holiday season's results early in January, which included the months of November and December. The management team projected a total YOY top-line growth of "more than 9 percent in the fourth quarter", suggesting the Street is mildly skeptical of Target's revenue-generating abilities in 4Q17. But to me, the farther the retailer gets into the execution of its omnichannel, store remodeling and quick delivery plans, the lower the probability of top-line weakness becomes.

Luckily, in my view, the company has already gotten a head-start on current year guidance, setting it at "a low single-digit increase in its 2018 comparable sales and year-over-year stability in EPS generated by its core business, excluding the benefit of federal tax reform". Target's management team has had a recent history of being overly conservative on its outlook, which has caused the stock to tumble even following strong actual results. This week, the risk of a weaker-than-expected 2018 guidance is much lower than in previous periods, in my view.

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This article was written by

DM Martins Research profile picture

Daniel Martins is a Napa, California-based analyst and founder of independent research firm DM Martins Research. The firm's work is centered around building more efficient, easily replicable portfolios that are properly risk-balanced for growth with less downside risk.

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Daniel is the founder and portfolio manager at DM Martins Capital Management LLC. He is a former equity research professional at FBR Capital Markets and Telsey Advisory in New York City and finance analyst at macro hedge fund Bridgewater Associates, where he developed most of his investment management skills earlier in his career. Daniel is also an equity research instructor for Wall Street Prep.

He holds an MBA in Financial Instruments and Markets from New York University's Stern School of Business.

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On Seeking Alpha, DM Martins Research partners with EPB Macro Research, and has collaborated with Risk Research, Inc.

DM Martins Research also manages a small team of writers and editors who publish content on several TheStreet.com channels, including Apple Maven (thestreet.com/apple) and Wall Street Memes (thestreet.com/memestocks).

Analyst’s Disclosure: I am/we are long TGT. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (9)

stan11 profile picture
Target has had a pretty good run the last few months, but like the author, I believe that there is still $6-8 left to the upside. Buy on any dip.
Teutonic Knight profile picture
Yup, buy, buy now; low 80 is doable
stan11 profile picture
I'm OK with 80, too. Looks like TGT is up 0.40 this morning pre-market. Could be an opportune time to buy now.
After what they did to WMT. Think this goes much lower.
Teutonic Knight profile picture
Will TGT report earnings on March 6 in pre-market or aftermarket?
05 Mar. 2018
05 Mar. 2018
stan11 profile picture
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!

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