2/24/2016
By Charles Payne, CEO & Principal Analyst

Once again there are signs consumers are spending money they’ve been saving for months from lower gasoline prices, and while they are selective with purchases, there are clear winners emerging.  One name we thought would be a winner is Target (TGT), and after today’s session that saw the stock rally 4% on almost 200% increase in average daily volume, I think the street will jump on the bandwagon.

Comparable store sales blew away consensus of 1.4% growth driven by online sales that differentiated the company from rival Walmart.  Target’s free shipping without ticket limits more is attractive than the Walmart $50 minimum.   I’m also encouraged by slower decline in units per transaction, and of course, maintained pricing power.

The company actually missed consensus on top and bottom lines but guidance was robust and confident.   The high-end of full year guidance is $5.40, the street had modelled for $5.16.

Management points to success in Star Wars for strong toy growth and 4% comparable growth in those locations that feature home décor.  (I love the stuff they sell as it reminds me of highly the successful Home Goods offerings.)

Stock

Technically, the stock shattered the 200-day moving average and now sees some resistance around $81.00 but is poised to rally a lot farther.  We are reiterating our Buy rating.

Bottom Line 

The bottom line is that folks bought more gasoline and folks did a lot more shopping, not on the high-end level where one of my favorites (although thankfully we are not long), Restoration Hardware, was crushed after a big miss. 

Still, even if it’s on the edge, and at lower-end retailers, there are signs of life. 

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Charles Payne
Wall Street Strategies

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