Target Stock (TGT) Drops After Earnings Disappoint – Put Selling Outlook

Target Stock is being punished this morning on weaker than expected earnings. Target Stock trading symbol is TGT. For much of the past several days the analysts have been split on their outlook for Target’s earnings. Yesterday Target Stock hit an all-time high intraday of $71.91 as the majority of opinion was that earnings would surprise to the upside. After all, the latest economic news is that retail sales are improving along with the economy.

Target sales however disappointed. The quarterly earnings fell short of Target’s earlier projection of 1.10 to 1.20 per share for the past quarter as management indicated shoppers are cautious and checking prices. In other words competition is fierce.

Target Stock Pummeled on Earnings Disappointment

Quarterly earnings came in at .81 cents a share marking a huge drop from last year at this time which was $1.03 a share for the same quarter.  Target’s adjusted earnings of $1.05 per share also dropped from $1.11 delivered in the year-ago quarter. This relates to results from U.S. operations only.

Target Stock Total Earnings

Total earnings edged lower by 1% but gross profit in the US rose 2.3% but operating income fell 7.5%. Target’s credit card business increased their market share including their discount Red card program which does bode well for Target Stock.

Target Stock Drop

Target Stock 3 Month Daily Chart

The 3 month daily chart for Target stock shows the drop to the Lower Bollinger Band this morning. The last time Target Stock fell to the Lower Bollinger Band the stock shot back up which is typical of a stock in a rising pattern. Indeed on Monday Target Stock set a brand new high intraday of $71.91 which makes today’s collapse from the Upper Bollinger Band to the Lower Bollinger Band seem all that more dramatic.

Looking at the 3 month chart though you can see that there is some support down around the $67.50 valuation but stronger support for the stock is below the $64 level around the $62.50 price.

Target Stock 3 Month Daily Chart

Target Stock 3 Month Daily Chart

Target Stock 10 Year Chart

If we go back a lot further and look at the 10 year chart we can see that actually Target Stock is just now recovering the highs set back in 2007, at POINT A in the chart below.

The recession and bear market of 08-09 hammered Target Stock but since then it has been back on a pattern of establishing higher highs and higher lows which is indicative of a stock in a long-term uptrend.

You can see this is the pattern at POINT B, C, D and most recently E in Target Stock.

The drop at Point F broke the pattern somewhat but also set up a very nice support base in the stock at around the $50 to $55.00 level in Target Stock. If though the stock should head back to that level it will break the highs of D, C and B. It would obviously then signal a bear market to Target Stock and not be worth selling puts against.

Target Stock 10 Year Chart

Target Stock 10 Year Daily Chart

Target Stock Outlook Summary

The 10 year chart though is worth viewing because it also is interesting to note that at point A back in 2007, Target Stock’s earnings were lower than today as was its revenue. The PE then was higher in 2007 than it is today. Therefore I believe Target stock even with the drop in earnings is still well priced and while the upside may have trouble here, I do think the stock can hold the previous highs which on the Target Stock chart above are at point D. Those highs place support in Target Stock around the $62.50 to $65.00 level which will make Put Selling highly profitable. The earnings disappointment should make Put Selling against Target Stock highly profitable again but increase volatility will keep investors cautious and in a selling mood. This can only bring further trading opportunities for those investors who love selling options against Target Stock.

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