Will Target Stock Surge 30% In 2020?

Following an eye-watering performance in 2019, when it gained 94%, the Target stock momentum appears to be slowing down. The company missed the mark with holiday sales last week, which sent its shares 10% lower. 

Fundamental analysis: Holiday sales disappointed

Target, the eighth-largest retailer in the United States, reported lower-than-expected holiday sales which were underwhelming and which disappointed Wall Street. Same-store sales grew 1.4%, a number that is considerably lower than 3.7%, which was expected by market analysts. In the previous earnings call, Target said it expects same-store sales to increase 3% to 4%. 

The miss resulted in the 6.6% loss in stock price on the day of the announcement. Shares closed the week at $116.92, lowest levels since November. 

Some analysts argue that the miss that caused the dip in the shares’ price is a blessing in disguise, given last year’s performance. The company has benefited last year from closures and bankruptcies of other retailers.

Cowen has the price target for Target at $150, which is around 30% higher than the current market price. 

Technical analysis: Pull back possible

Target gained 94% in 2019 hitting the record high of $130.24 last month. Following the miss in same-store sales, shares fell around 10% as they now close down on the initial support around the $115 handle. This level represents a buying opportunity for investors who would like to buy Target stock. 

If the pullback deepens, then the next major support is the multi-year ascending trend line at $93. This area can receive another boost as the 100-DMA is catching up with the price action. It is expected that this area will receive major interest from investors, given the recent performance of Target. 

On the other hand, a rotation in price action at current levels would project extensions of $134.43 and $139.62 as their next target. The mid-term target for bulls remains the psychologically-important $150 mark. 

Summary

Despite the recent drop in stock price, caused by a miss in same-store sales for the holiday season, Target looks well-positioned for more gains.