Recent financial results from a major retailer prompted a surge in the stock that Real Money Columnist Stephen 'Sarge' Guilfoyle saw as an opportunity to sell.
Target’s (TGT) fourth-quarter earnings were good, but its revenue did not meet consensus. The retailer reported adjusted EPS of $3.19 (GAAP EPS of $3.21) that beat estimates and revenue of $30.996 billion, which produced year over year growth of 9.4%, but did not meet Wall Street’s estimates.
Customers have been shopping at Target both in its brick and mortar stores and online. Target’s comparable sales rose by 8.9% from the year ago period and digital sales increased by 9.2%.
The company repurchased $2.3 billion worth of common stock during the quarter and retired 9.7 million shares at an average price of $237.
Whatever the shortcomings were of the report, it was still enough to send shares soaring, up more than 10% in the immediate aftermath.
"Sell the rip?" Guilfoyle asked after the report. “Makes sense, I think, at least in retail, not that I will be leaving retail. Even at 20 times forward looking sales, I see Target rival Walmart (WMT) as better positioned technically to build from here, and I expect to migrate back into that name with this ‘found money.’”
The problem, according to Guilfoyle, is that Target’s stock is still in a downward trend even though he is a fan of both the retailer and its CEO Brian Cornell. “Yes, I do realize that at 15 times forward looking earnings, Target is cheap,” he wrote. It's just that Walmart, at a higher valuation of 20 times forward earnings, still has a better looking chart technically.
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