While most eyes are focused on mega-cap tech stocks driving the S&P 500 and Nasdaq to new heights, there’s a potentially lucrative situation unfolding on the retail front. Target Corporation (TGT) is commanding attention, particularly due to its 3% dividend yield and significant support levels. Is this enough to tempt the discerning investor?
Target stock has been facing a downward trend since its mid-May earnings report. What’s more, it’s been on a more extended downturn, with shares diminishing for four consecutive months.
On May 17th, the company announced a top and bottom-line beat of analysts’ estimates, sparking an initial rally of 2.5% in the shares. However, the ensuing guidance left investors wanting, leading to a quick reversal.
Post-earnings, Target stock saw a steep decline of over 12.5%, falling in six successive trading sessions. Now, the stock is wading into vital support territory, which, combined with a dividend yield just north of 3%, makes it a compelling prospect.
Adding weight to this proposition, Target announced a dividend hike of 20% in September, marking the 51st straight year of an annual dividend increase.
But will the combined attraction of the dividend and technical setup be enough to draw investors in?
When evaluating Target’s downturn, several factors come to mind.
Firstly, the broader retail sector’s performance is discouraging, with many names including Ulta Beauty (ULTA), Home Depot (HD), and Target demonstrating a less-than-encouraging trend.
Secondly, looming concerns of a potential recession have added to the woes. Companies heavily dependent on consumer spending, such as Target, are being drawn into this cloud of uncertainty.
Lastly, controversies have not had a favorable short-term impact on stock performance. While this issue has made waves in companies like Anheuser-Busch (BUD), it’s also evident in firms like Target. Although, the first two factors seem to be casting a larger shadow than the third, as Target shares have been under strain for some months now.
Despite these challenges, Target’s stock valuation appears reasonable, assuming management doesn’t adjust its guidance downwards. As we can’t predict such changes, we can only consider the current facts: Target is a consistent dividend payer, and its shares are hovering around significant support levels.
A brief examination of the weekly chart shows that the stock has slumped almost 50% from its all-time high. It now finds itself bracketed between roughly $138 to $140 on the downside and around $180 on the upside, with a 52-week low of $137.13.
Investors might consider buying Target stock around the $140 mark, setting a stop-loss slightly below this range at, say, $135. They could then anticipate a rebound to the $160 area, potentially even $180.
Breaking through the $180 barrier would put investors in a favorable position with a low-cost basis, although there’s still a fair amount of ground to cover before we reach that point.
In conclusion, every investor can tailor a strategy to fit their risk profile, but the amalgamation of technical and fundamental perspectives outlined above presents a reasonable approach to Target’s stock in the current climate.