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The Best Options Trading Strategy for Target (TGT) Earnings

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On Wednesday, August 17th, Target (TGT - Free Report) will release its Q2 2016 earnings results. The company is currently a Zacks Rank #3 (Hold) and shares are up about 1.9% year-to-date.

At 1pm on Tuesday, August 16th, Dave will look into Target’s past earnings, look at what is currently going on with the company, and gives us his thoughts on their upcoming earnings announcement.

Furthermore, Dave will look into some potential options trades for investors looking to make a play on Target ahead of earnings.

Target in Focus

Target Corporation operates as a general merchandise retailer. It offers household essentials, electronics, apparel, food, pet supplies, home furnishings, décor, automotive products, and seasonal merchandise, along with in-store amenities.

Target is coming off of an earnings beat of 7.5% in its Q1 2016 earnings report, posting an EPS that was $0.09 higher than the Zacks Consensus Estimate.

TGT has an average EPS surprise of 4% for the last four quarters. In Q2 2015, TGT beat estimates by 9.9%. TGT then went on to meet estimates in Q3 and then miss Q4 expectations by 1.3%.

TARGET CORP Price, Consensus and EPS Surprise

TARGET CORP Price, Consensus and EPS Surprise | TARGET CORP Quote

Heading into this earnings report, our Most Accurate Estimate for Target is $1.13, the same as the Zacks Consensus Estimate.

Just last week, shares of Target slipped 4% on news that Cleveland Research noted decreased customer traffic in July as a catalyst for downward earnings estimate revisions. However, the company has been developing various initiatives to help boost traffic.

The company has increased its online presence, which saw a 34% increase in online sales in Q1. Furthermore, it is emphasizing smaller format stores and is expanding its merchandise offerings. Target is especially focused on expanding its style, baby, kids, and wellness categories, which were its strongest performers in Q1.

Last year, Target sold its pharmacy business to CVS Health (CVS) for $1.9 billion. Although the deal has decreased revenue year-over-year, the business was otherwise not turning a profit, and the move could improve margins moving forward.

Competition with the e-commerce industry has hurt brick-and-mortar retailers, but they are not out for the count just yet.

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Dave Bartosiak is the editor of the Momentum Trader and Home Run Investor service. He has over a decade of experience in the financial services industry. He has traded forex, futures, stocks, and options. Mr. Bartosiak is a frequent guest on popular business news TV channels such as Bloomberg TV. He’s also the host of a light-hearted, Millennial-minded series of videos called “Trending Stocks.”

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