Target (NYSE:TGT), Walmart (NYSE:WMT) and Costco (NASDAQ:COST) have long set the tone for what we should expect from big box retailers. But are investors better off buying or selling these retail stocks in today’s market?
It has been a gift of a year in 2019 for TGT, WMT and COST stock investors. Coming into Thursday’s session, shares were up roughly 21%, 30% and 33%, respectively, and well ahead of a spirited 17.5% return in the large cap VanEck Vectors Retail ETF (NYSEARCA:RTH).
But if we’re to believe formidable investment house Goldman Sachs, the good tidings for these retail stocks aren’t over either.
Shares zipped ahead by roughly 0.75% to nearly 2% following a bullish analyst note from the firm’s Kate McShane. Ms. Shane initiated buy recommendations on the trio and a spot on Goldman’s Conviction Buy list for Target, citing favorable company-specific catalysts and each retailer’s ability to continue taking market share from weaker players.
Still, while existing shareholders have been happy shoppers in these big box stocks, with price targets of $102 for TGT stock, $123 in WMT and $290 for shares of COST, are the price charts telling today’s investors to shop, take profits or browse the inventory and wait for a markdown?
Target is the first of our three big box retailers. According to Goldman Sachs, TGT stock has the most upside potential. The firm sees the company’s sustainable same-store sales growth, sustainable operating income and room for additional upside profits backing its price target of $102, which implies a return of about 17%.
On the monthly price chart, our assessment of TGT stock is similarly bullish. Shares are currently trying to break out to new highs from a fairly common V or cup-shaped correction following the market’s broad-based sell-off in late 2018.
What I like about Target’s technical situation is this year’s comparatively smaller correction relative to others over the past decade and relative weakness over that period potentially sets up a more bullish change of character and above-market returns going forward.
TGT Stock Strategy: With the monthly stochastics neutral and trending higher, the only item I’d wait on before purchasing TGT stock is a confirmed breakout of a five-week flat base through $89.41.
Walmart is the second of the big box stocks to watch now. For Walmart, Goldman sees upside potential of around 7.5%. The outlook is based on the company’s massive and well-positioned brick-and-mortar sprawl as smaller competitors close their doors.
Additionally, the firm is also positive on Walmart’s proactive and aggressive omnichannel strategy that it has put in place to successfully fend off the likes of Amazon (NASDAQ:AMZN).
Technically, our view is WMT’s monthly uptrend looks prone to profit-taking. Shares are marginally above a several year-long resistance line with stochastics in overbought territory and starting to turn lower.
WMT Stock Strategy: Buy shares on a pullback. As the illustrated monthly view shows, I see the color of money for WMT stock investors nearer $100, which offers some trend-line and whole-number psychological support, as well as the opportunity for a reset in the stochastics indicator.
Costco is the final retail stock that I think is worth watching right now. Goldman estimates COST stock has roughly another 4% to 5% upside based on its price target of $290. The firm believes there’s bullish earnings risk due to the company’s solid management and loyal customer base, which has resulted in consistently exceptional returns within the retail sector.
On the COST stock price chart, bullish momentum is in play. As most investors are aware, momentum is great for quick profits, until it’s not. And with monthly stochastics backing today’s bid and the psychologically attractive $300 level about 8% above current levels, I see this price enthusiasm and bullish trend continuing.
COST Stock Strategy: Shares of COST are in position to be purchased today for a targeted move into a price range of $300 – $315. This entry is based on momentum continuing to prove itself. As such, I’d be quick to exit with a tight stop beneath $270. This minimizes risk to under 3% and avoids holding shares that could reasonably trade quickly down toward $250 under less-enthusiastic conditions.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies and related musings, follow Chris on Twitter @Options_CAT and StockTwits.