Target reports first-quarter earnings May 18

What's Happening

Retailer Target ( TGT ) will report the results of its first-quarter on May 18. The company will report before the market opens, with analysts calling for earnings of $1.20 for the quarter. During the same period last year Target earned $1.10, and the stock is up a modest 4.1% so far this year.

Technical Analysis

TGT was recently trading at $75.59, down $10.22 from its 12-month high and $9.13 above its 12-month low. Technical indicators for TGT are bearish and the stock is in a strong downward trend. The stock has fallen below recent support and has recent resistance below $77.40. Of the 17 analysts who cover the stock, eight rate it a "strong buy", seven rate it a "hold", and two rate it a "strong sell". The stock receives S&P Capital IQ's 3 STARS "Hold" ranking.

Analyst's Thoughts

Target has been in the news a lot lately, mainly due to the company's controversial transgender bathroom policy, a hot button issue after the state of North Carolina passed a law requiring individuals to use the bathroom associate with the gender on their birth certificate. Target goes against the law, stating that individuals should be able to use the bathroom they associate their gender with, but also stated that it will be offering "family bathrooms" in all its locations in the next few months for customers that feel uncomfortable with its policy. The company will have the chance to be in the news for something different when it reports its quarterly results. Target posted weaker than expected results in February, but the stock moved higher as a result of better than expected same store sales, and solid online-sales numbers. E-commerce is an important segment for the company, and moving forward it will be even more important. Target is aiming for 40% long-term growth of its e-commerce business, and Wall Street will pay close attention to how it progressed with its e-commerce growth during the recent quarter. The Street's whisper number is slightly higher than the consensus, at $1.22 per share, which increases the likelihood of an earnings beat, but pay close attention to the e-commerce numbers, as any growth less than 25% versus the same period last year will be seen as weakness and drive shares lower.

Stock Only Trade

Bullish Trade

If you want a bullish hedged trade on the stock, consider a July 60/65 bull-put credit spread for a 30-cent credit. That's a potential 6.4% return (37.0% annualized*) and the stock would have to fall 13.6% to cause a problem.

Bearish Trade

There are no bearish trades at this time that offer an acceptable level of return for the risk. With the stock's recent strong move to the downside, and a P/E of just 14.1, there is too great a chance of the stock making a significant move higher on an earnings beat, and we would require significant protection to warrant a bearish trade at this time.

Covered Call Trade

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Originally published on

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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