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Is Target (TGT) a Great Back-to-School Stock Pick?
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Back-to-school season is almost upon us, and that means investors needs to start looking at companies that thrive during this time of the year. Just like during the holidays, retailers around the country will be using special promotions and deals to attract the most customers during this busy shopping period, and all-in-one stores like Target (TGT - Free Report) are no exception.
During the back-to-school season, investors need to remember how the market tends to react to things. While back-to-school business will already be priced in to most retail stocks, the market will always tend to react positively to any additional news about a company’s success during promotional periods.
With that in mind, the best back-to-school stocks are those that are already poised to succeed with strong fundamental metrics and are also in a competitive position to get the most back-to-school shoppers through the doors.
Although Target has made some improvements recently, it’s not necessarily a guarantee during the back-to-school season this year. Currently, Target has a Zacks Rank #3 (Hold) and is giving off plenty of mixed signals.
The Numbers
While the majority of Target’s back-to-school revenue will come in the current quarter, the company has yet to report its earnings for the period ending in July. For that quarter, Target has not seen any estimate revisions within the last 60 days, and its lack of a positive Earnings ESP makes surprise prediction difficult. Our current estimates call for earnings of $1.13 per share on $16.21 billion of revenue, which would represent a year-over-year decline of about 7% in both categories.
On the other hand, Target is coming off its most recent earnings beat of 7.5%, and the company also sports some solid Style Scores. Right now, Target has an “A” grade for both Value and Growth, as well as an “A” grade in the weighted average VGM category.
Target also falls into the Discount Retail industry category, which currently sits in the top 18% of the Zacks Industry Rank.
Back-to-School Trends
While the fundamental figures don’t give us the clearest picture, it’s also important to note that Target is the type of store that looks to have a great back-to-school season this year. According to research from the National Retail Federation, families this year are feeling more confident about the economy and will spend more money on back-to-school supplies.
The NRF projects that the average family buying supplies for K-12 students will spend $673.57, up from last year’s $630.26. Spending is expected to be higher in the college market as well, with total spending by families of college students projected to grow over $5 billion to $48.5 billion.
This could spell good news for Target, which stocks just about everything and can appeal to both K-12 and college students.
Bottom Line
Target and its investors always expect stores to be busy during the back-to-school season, but it’s unclear whether this year will be special for the company. For right now, there are too many mixed signals to guarantee any spectacular stock performance. With that said, shopping trends could lead more customers to Target this year. If you want to look at more back-to-school stocks, check out our 5 Stocks to Watch This Back-to-School Season.
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Is Target (TGT) a Great Back-to-School Stock Pick?
Back-to-school season is almost upon us, and that means investors needs to start looking at companies that thrive during this time of the year. Just like during the holidays, retailers around the country will be using special promotions and deals to attract the most customers during this busy shopping period, and all-in-one stores like Target (TGT - Free Report) are no exception.
During the back-to-school season, investors need to remember how the market tends to react to things. While back-to-school business will already be priced in to most retail stocks, the market will always tend to react positively to any additional news about a company’s success during promotional periods.
With that in mind, the best back-to-school stocks are those that are already poised to succeed with strong fundamental metrics and are also in a competitive position to get the most back-to-school shoppers through the doors.
Although Target has made some improvements recently, it’s not necessarily a guarantee during the back-to-school season this year. Currently, Target has a Zacks Rank #3 (Hold) and is giving off plenty of mixed signals.
The Numbers
While the majority of Target’s back-to-school revenue will come in the current quarter, the company has yet to report its earnings for the period ending in July. For that quarter, Target has not seen any estimate revisions within the last 60 days, and its lack of a positive Earnings ESP makes surprise prediction difficult. Our current estimates call for earnings of $1.13 per share on $16.21 billion of revenue, which would represent a year-over-year decline of about 7% in both categories.
On the other hand, Target is coming off its most recent earnings beat of 7.5%, and the company also sports some solid Style Scores. Right now, Target has an “A” grade for both Value and Growth, as well as an “A” grade in the weighted average VGM category.
Target also falls into the Discount Retail industry category, which currently sits in the top 18% of the Zacks Industry Rank.
Back-to-School Trends
While the fundamental figures don’t give us the clearest picture, it’s also important to note that Target is the type of store that looks to have a great back-to-school season this year. According to research from the National Retail Federation, families this year are feeling more confident about the economy and will spend more money on back-to-school supplies.
(Also Read: How Will Shoppers Spend This Back-to-School Season?)
The NRF projects that the average family buying supplies for K-12 students will spend $673.57, up from last year’s $630.26. Spending is expected to be higher in the college market as well, with total spending by families of college students projected to grow over $5 billion to $48.5 billion.
This could spell good news for Target, which stocks just about everything and can appeal to both K-12 and college students.
Bottom Line
Target and its investors always expect stores to be busy during the back-to-school season, but it’s unclear whether this year will be special for the company. For right now, there are too many mixed signals to guarantee any spectacular stock performance. With that said, shopping trends could lead more customers to Target this year. If you want to look at more back-to-school stocks, check out our 5 Stocks to Watch This Back-to-School Season.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>