Retail Enters the Buy Range as Companies Continue to Pass on Guidance

The latest retail company to report earnings has continued the trend of failing to report guidance. And that’s once again spooked the market into a selloff. With where stocks are at right now, the move has created some opportunities to buy near the lows of the year.

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  • The latest player? Target (TGT). The company earned $2.73 per share for the last quarter of 2020, a massive jump from the $1.65 per share in the fourth quarter of 2019.

    Yet despite those massive numbers, including a 21 percent jump in revenue, the market didn’t like the lack of guidance for the quarter ahead.

    Nevertheless, the retail’s numbers were so good, shares started the day off with a rally before sliding. That created one of the stock’s widest trading days in months, and also allowed shares to slip to lows of the year. Given the numbers the company is likely to continue posting — even without specific guidance — it’s clear that this retailer, like many others, can head higher.

    Action to take: The selloff from lack of guidance has created a solid entry point for investors now. The recent drop has pushed the stock’s dividend yield to 1.5 percent. It’s not huge, but it’s been growing over time.

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  • For traders, shares are likely to rebound from the guidance drop and trend higher in the coming months. The July $185 calls lost a third of their value as shares slid a measly 5 percent. That’s a great prospective return, and it’s at a strike price where it could also move in-the-money.