Why Pete Najarian Bought Target Stock Following Selloff

Target Corporation TGT shares turned sharply lower Tuesday morning after the company adjusted its second-quarter outlook based on excess inventory buildup. 

Market Rebellion co-founder Pete Najarian jumped at the opportunity to add to his Target position, applauding management's approach. 

"They are willing to be very rapid in how they work this out, get out of this and then move on," Najarian said Tuesday on CNBC's "Fast Money Halftime Report."

What To Know: Target is planning to take several actions to optimize inventory in the second quarter, including additional markdowns, removing excess and canceling orders.

As a result, the retailer now expects its second-quarter operating margins to be around 2%. However, margins are expected to rise to around 6% during the second half of the year.

Why It Matters: The consumer is not the issue, Najarian stressed. By taking immediate steps to mitigate the inventory problem, Target can limit its weaker margins to one quarter, he added.

"They made a mistake. They obviously got too much and now they're going to have to fire sale it. That's why those margins will drop, but it's also why, once they get through that, I think those margins very easily get back to where they were before," Najarian said.

The bounce in the stock today shows investors are buying into the idea this is a second-quarter issue and not a second-half issue, he said.

Najarian noted he also saw increased call-buying activity in the name following the selloff. 

"Usually Target is not anywhere close to the top 10. It's getting closer to the top 10 in terms of volume," he said.

See Also: Stocks That Hit 52-Week Lows On Tuesday

TGT Price Action: Target has a 52-week high of $268.98 and a low of $145.51. The stock was down 2.71% at $155.34 at press time Tuesday, according to data from Benzinga Pro.

Photo: Courtesy of Target.