Will Target Find Support?

With shares of Target (NYSE:TGT) trading around $60, is TGT an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework.

T = Trends for a Stock’s Movement

Target operates general stores in the United States as well as online where it sells merchandise at discounted prices. It operates in three segments: U.S. Retail, U.S. Credit Card, and Canadian. Target’s online presence is designed to enable consumers to purchase products either online or by locating items in one of its stores with the aid of online research and location tools. Groceries, clothing, household items, and general merchandise can be found at Target, making it an efficient shopping experience for consumers throughout the nation.

Kantar Retail’s latest findings for Target this week didn’t surprise consumers, investors, or even the company’s executives: Target traffic has dropped significantly since its large-scale data breach in December. USA Today reported on Kantar’s findings on Tuesday, saying, according to the consulting group, Target’s customer traffic in January, online and in stores, fell to its lowest point in three years. Thirty-three percent of U.S. households shopped at Target in January, while 43 percent visited the store in January 2013. Those numbers showed significance losses for the now-struggling Minneapolis-based retailer, and Kantar said the group of shoppers most to blame for the declines include Gen Xers, along with “fringe” shoppers who don’t shop very often, but when they do, it’s at Target. Kantar’s data showed that visits by lower-income customers who shop less frequently declined 30 percent, while Gen-X shoppers — ages 32 to 49 — declined to 38 percent from 53 percent last year.

Target’s holiday season data breach that resulted in the theft of about 40 million credit and debit card accounts, as well as 70 million other records with customer information, therefore affected the way consumers shopped at the beginning of 2014, and it is still playing a part in their shopping decisions three months after the fact. Though Target has vowed to restructure its security system in order to ensure no breach occurs again, many customers are still leery about shopping at the discount retailer, and some are more likely to visit Target’s many rivals, including Wal-Mart Stores Inc. (NYSE:WMT) and Amazon.com (NASDAQ:AMZN).

T = Technicals on the Stock Chart Are Mixed

Target stock has struggled to make significant progress over the last couple of years. The stock is currently trading sideways and may need time to stabilize. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Target is trading between its rising key averages which signal neutral price action in the near-term.


Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Target options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Target options




What does this mean? Investors or traders are buying a very small amount of call and put options contracts as compared to the last thirty and ninety trading days.

Put IV Skew

Call IV Skew

April Options



May Options



As of Wednesday, there is average demand from call and put buyers or sellers, all neutral over the next two months. To summarize, investors are buying a very small amount of call and put option contracts and are leaning neutral over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on Target’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Target look like and more importantly, how did the markets like these numbers?

2013 Q4

2013 Q3

2013 Q2

2013 Q1

Earnings Growth (Y-O-Y)





Revenue Growth (Y-O-Y)





Earnings Reaction





Target has seen decreasing earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have had mixed feelings about Target’s recent earnings announcements.

P = Average Relative Performance Versus Peers and Sector

How has Target stock done relative to its peers – Wal-Mart (NYSE:WMT), Costco (NASDAQ:COST), and Kohl’s (NYSE:KSS) — and sector?






Year-to-Date Return






Target has been an average performer, year-to-date.


Target operates discount general stores across North America where consumers continue to enjoy their shopping experience. USA Today reported on Kantar’s findings on Tuesday, saying that Target’s customer traffic in January, online and in stores, fell to its lowest point in three years. The stock has struggled to make significant progress and is currently trading sideways. Over the last four quarters, earnings have been decreasing while revenues have been mixed, which has produced mixed feelings among investors. Relative to its peers and sector, Target has been an average year-to-date performer. WAIT AND SEE what Target does the rest of this quarter.

Using a solid investing framework such as this can help improve your stock-picking skills. Don’t waste another minute — click here and get our CHEAT SHEET stock picks now.

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