Target shares could reach $200 resistance as Bank of America assigned a buy rating

Written by: Stanko Iliev
January 20, 2021
  • Bank of America assigned a buy rating on Target
  • Wells Fargo lifted its 2020 EPS estimate on Target to $9.10 from $7.00
  • Bulls remain in control of the price action

Joe Biden was inaugurated as the 46th U.S. president, and Wall Street’s three main indexes advanced this Wednesday. Target (NYSE: TGT) shares continue to trade in a bull market, and everything indicates that the price could reach $200 resistance this January.

Fundamental analysis: Target will have a strong Q4 report

Target Corporation is the 8th-largest retailer in the United States that operates in more than 1,844 stores across the country. Their retail formats include discount stores,  hypermarkets, and “small-format” stores.

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The company’s business has proven resilient throughout the pandemic, and shares of this company continue to move in an uptrend. Target reported Q3 results in November; total revenue has increased by 21.2% Y/Y to $22.63B while Q3 GAAP EPS was $2.01 (beats by $0.50).

Total revenue has increased above expectations (beats by $1.89B), and the company continues to improve its position on the market. Last week, the company declared a $0.68/quarterly share dividend, which will be payable in March.

Wells Fargo has a price target of $190 on Target and expects the company to have a strong Q4 report with current consumer trends continuing into 2021. Wells Fargo lifted its 2020 EPS estimate on Target to $9.10 from $7.00 prior and $7.33 consensus.

Target is facing the current covid crisis relatively well, and the company continues the expansion of its online selection of grocery items. Online grocery sales will continue to grow, and by 2023, it will account for 10% of total grocery sales.

 “We’ve got growth coming from new customers and growth coming from existing buyers who are either spending more frequently or more per trip. When you add these two factors together, what you get is astronomical growth,” said Cindy Liu, eMarketer senior forecasting analyst at Insider Intelligence.

Digital sales have advanced more than 100% during the Holiday period, and Bank of America thinks that Target performed exceptionally well during these two months. Because of this, Bank of America assigned a buy rating on Target and calls it favorably positioned for COVID-19 and the long-term.

The company’s management will continue to focus on strong sales trends in 2021, which could be even better.  “We’ve seen strong sales trends in the last year, and as we turn to our 2021 plans, our team remains to focus on continuing to build on the guest engagement and significant market share we gained throughout 2020,” said the CEO of the company.

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Technical analysis: Bulls remain in control of the price action

According to technical analysis, Target shares could advance above the $200 resistance this January. Still, if the stock market enters a correction phase, the stock price will be at much lower levels.

Data source: tradingview.com

The critical support levels are $180 and $150; $200 and $220 represent the resistance levels. If the price jumps above $200 resistance, the next target could be around $210, but if the price falls below $150, it would be a firm “sell” signal and probably a sign of the trend reversal.

Summary

Joe Biden was inaugurated as the 46th U.S. president, and Wall Street’s three main indexes advanced this Wednesday. Bank of America assigned a buy rating on Target, and everything indicates that the price could reach $200 resistance this January.