Should you buy Walmart or Target ahead of the retail trade association’s sales forecast?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 24, 2021
  • The National Retail Federation will post sales forecasts for the holiday season on Wednesday.
  • The retail trade association will also discuss current consumer spending and shopping trends.
  • US retail stocks could gain significantly ahead of the NRF numbers.

Walmart Inc. (NYSE: WMT) and Target Corp (NYSE: TGT) shares have recently spiked ahead of an exciting holiday season. The stocks could rally further when the National Retail Federation (NFR) releases its sales forecasts for the holiday season on Wednesday.

Therefore, with both stocks currently enjoying solid bull runs, which is the better buy?

Walmart

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From an investment perspective, Walmart shares trade at a steep price-earnings ratio of 41.80, making the stock less attractive to value investors. In addition, its earnings growth prospects of -8.5% this year and a rebound of just 4.28% next year are less attractive to growth investors.

Therefore, although the company could experience a significant rise in the stock price amid the holiday season sales, it may be best to take some profits ahead of a potential pullback.

Source – TradingView

Technically, WMT seems to have recently rallied to the overbought conditions of the 14-day RSI, creating a perfect opportunity for a pullback. Therefore, given the company’s steep valuation multiples, it may be time to take some profits.

Investors could target potential pullbacks at about $146.28, or lower at $144.08. On the other hand, if the rally continues, the stock could find resistance at $150.52, or higher at $152.46.

Target

Target shares have also rallied recently. However, its P/E ratio still looks attractive at 20.39, making it a compelling option for value investors. 

Moreover, analysts expect Target’s earnings per share to grow by more than 36% this year, before rising at an average annual rate of 13.29%. Therefore, the stock could also gain the attention of growth investors.

Source – TradingView

Technically, Target shares appear to have rallied to the overbought conditions of the 14-day RSI. However, the stock is yet to retest its August highs of about $275.54, leaving room for more upward movement.

Therefore, investors could target extended gains at about $265.09, or higher at $275.54, while $243.37 and $230.27 are support levels. 

Buy Target, sell Walmart?

In summary, although both stocks could gain significantly after Wednesday’s retail sales forecast from NRF, Target looks like the better buy while it could be time to sell Walmart.

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