Target Corporation (TGT) — Shares fell 3% Wednesday as investors rushed for the exits in retail stocks. The selling was sparked by a big drop in quarterly sales and reduced guidance from Macy’s, Inc. (M), whose stock plummeted more than 14% on the day.
Target is expected to deliver its next earnings report on Nov. 18. For its fiscal third quarter, the consensus expects revenue to decline slightly but for earnings to jump nearly 60% to 86 cents per share. For the full fiscal year, ending in January, analysts estimate 2.3% revenue growth and a 10.5% increase in EPS to $4.72.
However, given Macy’s disappointing report and the high likelihood of an interest rate increase in December, I think current revenue and earnings projections for Target and other retailers will be adjusted lower.
TGT stock has been in a bear market since falling from its all-time high just below $86 in late June. Since then, it has traded in a channel down with about 8 points from support to resistance.
In late September, the 50-day moving average crossed down through the 200-day, triggering a death cross. And last week, TGT stock fell away from its resistance line at about $78. There has been above-average selling since mid-October.
Sell TGT stock short at $76 or higher with a price target of $69 by year end. This would result in a potential gain of about 9%; however, there is a possibility that a high-volume sell-off could make traders even greater profits.
A stop-loss order should be entered at $80. Also, be aware that if you hold TGT stock short through the company’s ex-dividend date on Nov. 18, you will be responsible for paying the 56-cent quarterly dividend (3% current yield) to the owner of the stock.
