What to Expect from Target Stock



Stock price movement

Target (TGT) is showing a strong uptrend as better-than-expected holiday sales, improving fundamentals, and an anticipated increase in its EPS (earnings per share) in fiscal 2018 have led analysts to raise their target price on the stock and lifted the stock higher. The acute selling pressure stemming from the rising interest rates didn’t have much of an impact on Target stock. TGT stock has gained about 15.5% on a YTD (year-to-date) basis as of February 14, 2018, and outperformed the benchmark index (SPX-INDEX), which is up approximately 1.0% on a YTD basis.

Target stock also performed better than that of Walmart (WMT) and Costco (COST) during the same period. Walmart stock is up about 3.0%, while Costco stock increased marginally on a YTD basis.

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Improving fundamentals support growth

As discussed in the earlier parts of this series, Target’s fundamentals are improving. The company’s top line is projected to grow on the back of higher e-commerce sales, driven by the rollout of consumer-friendly offerings including the Restock program, Drive Up services, the launch of exclusive brands, a new fast delivery mechanism, and price investments.

Besides, the accelerated pace of store remodeling and small-format store openings could further supplement its sales, as these stores are witnessing strong comps growth and generate higher productivity.

Also, the enactment of the Tax Cuts and Jobs Act should act as a catalyst to its fiscal 2018 EPS, which is projected to improve on a YoY (year-over-year) basis. However, increased price investments to fend off competition and drive store traffic, an unfavorable mix, and increased digital fulfillment costs could prove to be dampeners.


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