Target Customers Just Looking For Deals? Stock Flashes Bearish Warnings As EPS Guidance Unchanged Despite Record Holiday Sales

Target Corp.’s TGT total sales grew by 2.8% over the last two months, with record-high sales during the holiday shopping season. Despite this, the retailer kept its EPS guidance unchanged. As this unfolds, the technical analysis of its moving averages is flashing a warning sign.

What Happened: Target’s customers could just be looking for “deals” while shopping at the retailer’s store as pointed out by its chief commercial officer Rick Gomez during its third-quarter earnings call.

Consumers "know there are deals to be found, they're willing to wait for sales and willing to search across multiple retailers,” said Gomez.

The company in its latest press release said that discretionary sales accelerated during the holidays, especially in apparel and toys, with continued strength in beauty and high-frequency categories. Holiday sales grew 2.8% year-over-year with comparable sales up 2%.

Additionally, Target guided a 1.5% Q4 comparable sales growth and maintains its EPS guidance of $1.85-$2.45 for Q4 and $8.30-$8.90 for the full year.

The technical analysis of the company’s daily moving averages indicates bearish trends for the stock. Thursday’s close of $133.25 apiece was below its short and long-term moving averages.

The eight and 20-day moving averages stood at $137.68 and $135.25, whereas, the 50-day average was at $137.70 according to Benzinga Pro data. The stock price was much below its 200-day simple moving average of $149.05, signaling a bearish trend.

The relative strength index of 43.64 meant that the stock was in a neutral zone and it was neither overbought nor oversold.

Target vs Peers: During the third quarter, Target admitted to having higher sales only during promotional periods, whereas its peer, Walmart Inc WMT CEO, Doug McMillon attributed 75% of their market share gains to “households earning more than $100,000.”

Costco Wholesale Corp. COST, another Target rival, reported a strong sales figure in December with a 9.9% jump to $27.52 billion in net sales for the five weeks ended Jan. 5, as compared to $25.03 billion last year.

Looking at their earnings, both of Target’s peers beat its sales and EPS estimates. In Q3, Walmart posted earnings of $0.57 per share on the revenue of $169.59 billion. Whereas, Costco in Q1 reported earnings of $3.82 per share on revenue of $62.15 billion. On the other hand, Target in Q3 reported earnings of $1.85 per share on revenue of $25.67 billion, missing the street view.

Price Action: According to Benzinga Pro, Walmart had a price-to-earnings ratio of 33.113, while Costco’s P/E stood at 51.020. Target on the other hand was the least expensive among these peers with a P/E of 14.130.

TGT’s stock was up only 1.25% in the past month. Over the last six months, it experienced a 14.54% decline, and last year, it fell by 3.96% over the year.

Target has a consensus price target of $160.61 a ‘hold’ rating, according to the 31 analysts tracked by Benzinga. The high target is $210, and the low is $108. Recent ratings by Stifel, Daiwa Capital, and Oppenheimer suggest a $146.67 target, implying a 1021% upside.