By Peet Serfontein & Khumbulani Kunene
Target Corporation is one of the largest retail corporations in the United States (US) that focuses on merchandising operations which include general merchandise and food discount stores, including perishables, dry grocery, dairy, and frozen items while having a fully integrated online business - Target.com
Founded in 1902, TGT is headquartered in Minneapolis, Minnesota, and has evolved into a major player in the retail industry, operating over 1 900 stores nationwide. Target also sells merchandise through periodic exclusive design and creative partnerships, and shop-in-shop experiences, with partners such as Apple, Disney, Levi's, and Ulta Beauty, and generate revenues from in-store amenities such as Starbucks, Target Cafe, and Target Optical. Furthermore, Target also offers credit to qualified applicants through its branded proprietary credit cards.
Technically, a developing symmetrical triangle pattern is supportive (see the dotted black converging trendlines on the main chart). This is a bullish pattern signalling a period of consolidation, where buyers and sellers are reaching a temporary equilibrium before a potential breakout. The pattern is formed when the stock's price makes a series of lower highs and higher lows, creating two converging trendlines. During the formation of a symmetrical triangle, volume typically contracts as the price narrows within the pattern, reflecting decreasing volatility. Once a breakout occurs, an increase in volume can confirm the upward move.
The stock is in a trough in an Elliott Wave price cycle (Wave 13), which marks the conclusion of a corrective phase, particularly when it aligns with key Fibonacci retracement levels, and therefore supports the bullish case.
The stock is testing its simple moving average (SMA) of $153.83, which suggests that the longer-term trend is still positive.
Muted upside moment according to the MACD indicator, as well as the recent steep upwards trajectory of the on-balance volume (OBV) indicator supports our view.
Share Information
| Share Code | TGT |
|---|---|
| Industry | Consumer Staples Distribution |
| Market Capital (USD) | 71.7 billion |
| One Year Total Return | 49.64% |
| Return Year-to-Date | 11.63% |
| Current Price (USD) | 155.65 |
| 52 Week High (USD) | 181.86 |
| 52 Week Low (USD) | 107.13 |
| Financial Year End | February |
| This year the company's share price has achieved aggressive double-digit growth, with several indicators pointing to further upside potential. | |
Consensus expectations
(Bloomberg)
| FY24 | FY25E | FY26E | FY27E | |
|---|---|---|---|---|
| Headline Earnings per Share (USD) | 08.94 | 9.63 | 10.52 | 11.28 |
| Growth (%) | 7.76 | 9.21 | 7.21 | |
| Dividend Per Share (USD) | 4.38 | 4.46 | 4.47 | 4.63 |
| Growth (%) | 1.74 | 0.27 | 3.56 | |
| Forward PE (times) | 16.16 | 14.79 | 13.80 | |
| Forward Dividend Yield (%) | 2.86 | 2.87 | 2.97 | |
| Over the medium-term, earnings are expected to see stable single-digit growth and modest dividend growth. | ||||
Buy/Sell Rationale
Technical Analysis:
Fundamental view:
| Share Name and Position | WM US - Take profit (Close the position) | C US - Take profit (Close the position) | CHD US - Buy (Continue to hold) |
|---|---|---|---|
| Entry | 209.09 | 61.71 | 104.14 |
| Current | 224.78 | 69.02 | 107.99 |
| Movement | +7.5% | +11.8% | +3.7% |
| We suggest taking profit to reduce overall portfolio exposure. | We suggest taking profit to reduce overall portfolio exposure. |
A price in a developing rising wedge pattern remains of interest. Crossed above its 200-day simple moving average. The start of upside price momentum supports the trade strategy. Our profit target remains at $114.00 with a trailing stop-loss at $104.00. Exit the trade by 27 May 2025. |
| Share Name and Position | DELL US (Continue to hold) | DPZ US (Continue to hold) | DIS US (Continue to hold) |
|---|---|---|---|
| Entry | 123.78 | 416.77 | 94.05 |
| Current | 136.47 | 440.60 | 100.99 |
| Movement | +10.3% | +5.7% | +7.4% |
|
A price in wave 5 of an Elliott Wave pattern remains of interest. Remains above its 200-day SMA. Upside price momentum is supportive.
Our profit target is $148.00 with a trailing stop-loss at $124.50. Exit the trade by 10 January 2025. |
A price that is bouncing off its 200-week simple moving average (SMA) remains of interest. Remains just below its 200-day simple moving average, and the trade idea is regarded as a counter-trend strategy.
Our profit target remains at $482.00 with a trailing stop-loss at $414.00. Exit the trade by 20 November 2024. |
A price that usually performs bullish for the period October to May remains of interest. Testing its 200-day SMA and upside price momentum is supportive.
Our profit target is $105.00 with a trailing stop-loss at $96.00. Exit the trade by 23 April 2024. |
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