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Target (TGT) Up 13% in 3 Months: Is There More Room to Run?

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The past three months have turned out to be an eventful one for Retail-Discount & Variety industry. The industry has advanced 9.3%, outperforming the S&P 500’s gain of 3.5%. Moreover, it also occupies top 9% (24 out of 265) position among the Zacks classified industries. Stocks such as Target Corporation (TGT - Free Report) , Dollar General Corporation (DG - Free Report) , PriceSmart, Inc. (PSMT - Free Report) and Ross Stores, Inc. (ROST - Free Report) have witnessed a gain of 13.3%, 15%, 9% and 15%, respectively. Today we will focus on Target and try to analyze the catalysts that may help the stock to sustain momentum going forward.

Strategic Endeavors Well on Track

Target’s initiatives such as the development of omni-channel capacities, diversification and localization of assortments along with emphasis on flexible format stores bode well. Management plans to expand merchandise assortments with special emphasis on Style, Baby, Kids, and Wellness categories that are performing well. Moreover, the company is also concentrating on rationalization of supply chain, technology and process improvements.

These initiatives helped it to continue with upbeat performance in fiscal 2017 as reflected from impressive second-quarter results and an encouraging earnings outlook. Management now envisions third-quarter earnings in the band of 75-95 cents and fiscal 2017 earnings between $4.34 and $4.54 up from $3.80 to $4.20 per share projected earlier.

Focus on Digital Transformation

With digital transformation in shopping and consumers splurging online, store and mall traffic has been hit hard. As a result, most retailers including big-box ones are struggling to compete with e-commerce channels. Nevertheless, this transition in buying pattern has persuaded retailers to come up with innovative ways to market products, and Target is no exception to the trend.

In a bid to stimulate digital sales this holiday season, Target is strengthening relationship with Google by allowing customers nationwide to shop through Google Express, including voice-activated shopping. Target informed that customers will get their orders delivered within a couple of days, as the items will be shipped from a nearby outlet.

Further, Target, which has taken several strategic initiatives to drive performance, recently launched curbside pickup program, at 50 Twin Cities stores. This program gives customers an option to get their ordered items without leaving the comfort of their cars.

To avail the service the customers need to place orders via the latest version of Target’s app and then select “Drive Up”. Target will inform the customers when the order is ready for delivery. Once the shopper arrives to the chosen parking spot outside the Target store, an employee will bring the order to the vehicle.

Wrapping Up

We believe company is leaving no stone unturned to attract consumers and attain incremental revenues. Keeping in mind strong fundamentals, we believe this Zacks Rank #2 (Buy) stock will continue to build momentum going forward. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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