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Is Target (TGT) Stock a Must Buy Ahead of the Holiday Shopping Season?

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Target (TGT - Free Report) stock is in the midst of a year-long resurgence that has seen the retail powerhouse regain some of its mojo as it fights to secure its future through new store formats, delivery, and e-commerce. Now, it seems like it might be time to buy Target stock as we enter the vital holiday shopping period.

Holiday Shopping

Target announced last month its plan to hire 120,000 or 20% more seasonal workers during the upcoming holiday shopping period. The Minneapolis-based retailer also expects to double the number of holiday employees that work on online order fulfillment.

Target plans to add more workers to help its “Order Pickup” and “Drive Up” services run smoothly during the busy stretch. The firm also wants to roughly double the number of holiday hires to help fulfill digital orders.

Investors should note that while e-commerce expands, traditional brick-and-mortar shopping is hardly dead. In fact, Amazon (AMZN - Free Report) has actively expanded its physical retail presence. A recent eMarketer report noted that shoppers, especially those ages 18 to 24, still want a great in-store shopping experience (also read: 4-Star & Amazon's Physical Retail Push).

Overview

Target has redesigned many of its stores and opened smaller locations in urban areas and college towns over the last year or so, which should help the cheap chic retailer attract more shoppers. The company has also improved its pricing and revamped its digital strategy and supply chain.

On top of that, Target has introduced same-day delivery at over 700 locations through its Shipt acquisition and rolled out online ordering and curbside pickup at hundreds of stores.

Target saw its comparable sales surge 6.5% last quarter, which marked the firm’s strongest quarterly performance since 2005. The company’s digital comps also soared 41% and traffic expanded by 6.4%—which Target said was “by far the strongest” since it started to report traffic ten years ago.

Target’s most recent quarterly performance, along with fellow giants Costco (COST - Free Report) and Walmart (WMT - Free Report) helped to show that traditional retailers can adapt and thrive in the modern shopping environment.

Price Movement

 

 

We can see that Target stock has outpaced its industry over the last 12 months. Meanwhile, its roughly 45% climb crushes the S&P 500’s 15% jump. It is also worth noting that TGT stock has slipped recently, down over 4% in the last month. And this dip might actually set up a better buying opportunity as Target’s growth prospects look strong.

Outlook & Earnings Trends

Looking ahead, our current Zacks Consensus Estimate is calling for Target’s third-quarter revenues to jump by 6.5% to hit $17.75 billion. Target’s full-year revenues are projected to reach $75.13 billion. This would mark a 4.5% climb from fiscal 2017. Plus, Target’s comparable store sales—a key retail metric—are expected to jump by 5% in Q3, based on our NFM estimates.

At the other end of the income statement, Target’s adjusted Q3 earnings are projected to jump by 20.9% to $1.10 per share, while its full-year EPS figure is expected to pop by 14.3%.

Target has also experienced a ton of upward earnings estimate revision activity recently. TGT has seen five upward quarterly earnings revisions over the last 60 days, against just one downward change. Better still, during this same period Target has earned 10 full-year revisions and eight for fiscal 2019, with 100% agreement to the upside.

Bottom Line

Target is currently a Zacks Rank #2 (Buy) based on its positive earnings revision trends. The retail power also sports “A” grades for both Value and Growth in our Style Scores system to help it earn an overall “A” VGM score.

Plus, Target is currently trading at 15.5X forward 12-month Zacks Consensus EPS estimates, which represents a significant discount compared to its industry’s 27.5X average and the S&P’s 17.4X. Therefore, it might not be a bad idea to think about buying Target stock ahead of the holiday shopping season.

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