The Target stock price is gaining momentum as investors cheer the excellent results by the retailer. The shares have climbed by more than 4% in premarket trading, reversing the 1.7% losses it made yesterday. Target has a market capitalization of more than $1-2 billion.
This week, the focus among many investors in the United States is all about retailers. On Tuesday, we received the relatively strong earnings by Home Depot (HD), the giant home goods company. The same trend continued today when Lowe’s also released strong quarterly results, in a sign that most Americans used their stimulus checks to improve their homes.
Target, the giant Minneapolis-headquartered retailer, also released strong results. The company said that its comparable sales rose by 22.8% in the first quarter. This growth was mostly because of a 50% increase in digital sales same store sales. Its same day services rose by more than 90% in the first quarter. As a result, the Target stock price surged by more than 4% in premarket trading. In a statement, the company’s CEO said:
“Importantly, market-share gains of more than $1 billion in the first quarter, on top of $1 billion in share gains a year ago, demonstrate Target’s continued relevance with our guests, even as they have many more shopping options compared with a year ago.”
Is Target stock a buy?
Target stock price has had an excellent time during the pandemic. In the past 12 months, the stock has jumped by more than 70%, making it one of the best-performing stock in the S&P 500.
This growth was mostly because of the company’s strong revenue growth as people stockpiled during the pandemic. In other words, the company’s investments in its e-commerce were put into test and succeeded.
Obviously, the company also benefited from stimulus. In the first quarter, the US delivered a stimulus package worth more than $2.8 trillion. And this does not include the funds printed by the Fed. Most people received at least $2,000 directly. Obviously, most of them bought at Target and other retailers.
Therefore, the biggest challenge for the Target stock price is whether it will maintain this growth. In an interview with CNBC, the firm’s CEO said that he believes that the company’s growth will continue going forward.
Target stock price will also benefit from the ongoing shift ftom growth stocks to value companies as fears of high interest remains.
While the stock could cool down a bit, I think that Target is a good investment for long-term investors. Unlike Walmart, the firm has been careful on its e-commerce rollout. In other words, it only spent money on quality acquisitions and boosting its pick-up business. However, like I will explain below, the stock could see some pullback in the near term.
Target stock price analysis
Turning to the weekly chart, we see that the TGT stock price has been in a strong bullish trend. However, the stock has formed a rising wedge pattern that is shown in black. In market analysis, this is a sign that the stock’s growth is gaining momentum. Worse, the pattern is approaching its level of confluence. Therefore, while Target is a good company, there is a possibility that it will soon retreat as growth starts waning.