Stock price movement
Target (TGT) stock is up about 12.3% on a YTD (year-to-date) basis as of February 7, 2018, and has outperformed its peers. Plus, the company has also exceeded the S&P 500 Index (SPX-INDEX) in terms of price appreciation, as the recent stock market mayhem stemming from the rising interest rates wiped out the benchmark index’s gains. In comparison, Walmart (WMT) stock is up approximately 4.2%, while Costco (COST) is trading in the red on a YTD basis.
What’s working in favor of Target?
Target started the year on a higher note thanks to the stronger-than-expected holiday sales and upbeat outlook. The company’s sales are expected to improve in fiscal 2018, reflecting rising online sales driven by fast delivery options and value pricing. Besides, the company’s focus on merchandising through the rollout of exclusive brands further supports its top-line growth rate.
The company acquired Shipt to step up its same-day delivery process, which not only could result in driving consumers to its website but is likely to solidify its competitive positioning against Walmart, Costco, and Amazon (AMZN).
Also, Target’s store remodeling program and increasing number of small-format stores are expected to boost its sales and profitability as these stores generate higher comps and productivity.
Notably, the company’s bottom line is projected to stabilize in coming quarters despite significant margin pressure as a low effective tax rate owing to the recently enacted tax reform bill should provide enough room to pursue its growth initiatives without hampering its EPS growth rate.
All in all, analysts expect Target to witness improved sales and profitability in fiscal 2018, which is supporting the stock’s upside.