Target Corporation (NYSE: TGT) closed the previous session over 12% high after the company reported better-than-expected earnings for the fourth quarter, exceeding Wall Street’s expectations on both top and bottom lines. The company’s revenue grew nearly 2% YoY, driven by an additional week of sales compared to the prior year. Despite facing headwinds like inflation and increased theft, Target managed to boost its net income by nearly 58% YoY, surpassing its own forecast. This improvement is attributed to offering fewer discounts and benefiting from lower costs in various areas.
Looking ahead, Target remains cautious about the overall sales environment, projecting flat to up to 2% growth in comparable sales for fiscal 2025. The company is launching a paid membership program, “Target Circle 360,” offering free same-day delivery and other perks to compete with rivals like Amazon and Walmart. Target also plans to invest in store upgrades, refresh its membership program, and expand its private-label brands to recapture market share and profitability. Additionally, the company’s P/E ratio sits at 16.4X, a discount compared to the industry average and the broader market, potentially indicating some value for investors.
Technical Analysis
Target Corporation’s share is trading higher after opening over 8% higher in the previous session following better-than-expected earnings report. The share price trades comfortably above the slightly upward-sloping 50-SMA (blue line), 100-SMA (orange line) and 200-SMA (red line), with the shorter-term 50-SMA recently breaking above both the 100-SMA and 200-SMA.
With the recent gap up supported by elevated volume, a “gap-and-go” scenario might bring a two-year high of $181.70 into play, with the $193.74 resistance level acting as the next level of significance higher.
However, with the upward-inclined RSI (74.76) recently entering the overbought levels, the recently broken 78.60% Fibonacci retracement level could act as a significant level in the coming sessions. A break below the level would leave the 61.80% Fibonacci retracement level ($151.61) and 50.00% Fibonacci retracement level ($142.32) within the bears’ radar in the short term.
Summary
Target’s recent earnings report and planned initiatives paint a cautiously optimistic picture of the company’s future. Technically, the stock is poised for further upside, with potential resistance levels at $181.70 and $193.74. However, the overbought RSI and potential profit-taking could lead to a short-term pullback, finding support at $151.61 and $142.32.
Sources: TradingView, MT Newswire, Reuters, Zack’s, Target, Seeking Alpha, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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