Target Takes a Tumble on Weak Earnings and Forecast: Why it May Be Time to Sell TGT

Target (TGT) reported first-quarter results Wednesday that left much to be desired, sending shares tumbling lower. The company noted it is seeing a pullback in consumer spending.

Revenue came in at $24.53 billion compared to $24.52 billion expected, narrowly avoiding a missing on the top line. However, the retailer did miss the bottom line estimate with EPS of $2.03 vs $2.06 expected.

CEO Brian Cornell says that shoppers are remaining cautious in their spending habits amidst economic uncertainty, high interest rates, and higher credit card balances. They’re waiting for deals rather than buying stuff when they need it. They’re also allocating more purchases to out-of-home activities.

The segments that did perform well in Q1 were Beauty and Apparel – but Home Furnishings, Furniture, and Appliances were down. Traffic and time spent in the store were also down in the quarter, meaning customers were coming just to buy what they needed and leaving rather than shopping around as they had in the past.

This trend has sparked concern for Target and prompted price cuts on more than 5,000 products – many of which included non-discretionary items such as groceries, diapers, pet food, paper towels, and more.

The company’s main competitor Walmart recently reported better-than-expected results, speaking to the current state of the US economy. Shoppers are prioritizing deals rather than a higher-end shopping experience at this point in time.

As a result, Target issued a cautious outlook for the second quarter. It expects sales growth between 0-2% and adjusted earnings of $1.95 to $2.35 per share. This is more or less in line with what analysts expect, but the company will need to deliver at the high end to avoid another earnings miss.

TGT has fallen more than 7% on this news today, now down 14% in the past month. We’ve taken a closer look at this situation in the VectorVest stocks software and found a few reasons it may be time to sell this stock if you haven’t already.

TGT Has Very Good Upside Potential and Fair Safety, But Poor Timing is Weighing the Stock Down

VectorVest is a proprietary stock rating system designed to save you time and stress while empowering you to win more trades with less work. 

You’re given all the insights you need to make calculated decisions in 3 simple ratings - relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average, allowing for quick and easy interpretation.

It gets even better, though. You’re given a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. Here’s what we found for TGT:

• Very Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This indicator offers far superior insights than the typical comparison of price to value alone. As for TGT, the RV rating of 1.25 is very good. The stock is also undervalued at its current price with a current value of $177.76.
• Fair Safety: The RS rating is a risk indicator. It’s computed through an analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. The RS rating of 1.05 is considered fair for TGT.
• Poor Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year. The stock has a poor RT rating of 0.76, mirroring its recent performance.

The overall VST rating of 1.02 is fair for TGT, but the stock is rated a SELL as it continues to fall lower and lower. Learn more about this situation and make your next move with complete confidence through a free stock analysis at VectorVest today!

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VectorVest advocates buying safe, undervalued stocks, rising in price. TGT has tumbled more than 7% today on lackluster earnings results - the stock is now down 14% in the past month. It has very good upside potential and fair safety, but poor timing holding it back.

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