Buy and Hold This Underloved Value Retailer While It’s Cheap

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Mega-retailer Target (TGT) released earnings earlier this week. And while they were certainly a step in the right direction, analysts decided that one piece of news was worth a selloff of the stock.

Buy and Hold This Underloved Value Retailer While It's CheapBut before we get to that, let’s look at the good news.

TGT revised its 2015 numbers up again, this time by a nickle. Target’s net income grew 56% year-over-year, while earnings per share grew 59%. Both were big numbers compared to last year, as Target’s shuttering of its Canada operations affected sales and earnings.

While not stunning, revenue was also encouraging, rising 2% YoY; while same-store sales wafted up 1.9% with transactions increasing 1.4%.

These numbers are higher than what Walmart (WMT) reported, and signal that TGT is not only on the mend, but has restructured in the right direction.

So what made TGT stock drop 4% on its earnings release?

Online sales “only” grew 20% for the quarter. Last quarter they grew 30% and TGT was shooting for 40% growth for the year.

When major retailers like Macy’s (M) and Nordstrom (JWN) are bringing in downright bad numbers, it’s a little silly that investors slam TGT for 20% growth in any of its segments.

Its stock buyback program helps keep TGT’s 3.1% safe and attractive. And management guided higher for the fourth quarter as well as the entire fiscal year.

This is all very encouraging, and the selloff actually makes TGT a better bargain here than many of its peers with similar growth potential.

But the real crucible will be this holiday season. Consumers have been a wild card so far this year, no one knows when they’re going to show and what they plan on buying.

Plus, there’s always the question of where they’re going to buy it. Amazon (AMZN) is expecting to have a huge holiday season. And now that TGT has its online operation in robust shape, we’ll have to wait and see if Target and Walmart and other retailers see more online traffic during the season.

The first indicator: Black Friday.

Regardless, TGT is making the right moves to stay relevant and competitive. Which should become even more evident as its commitment to fast-fashion clothes lines and organic foods play out.

Until then, it’s worth a look now.

Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip GrowthEmerging GrowthUltimate GrowthFamily Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/11/tgt-big-box-retailers-consumer-discretionary/.

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