A specific stock or sector will often move in or out of favor with the market. When a stock or sector is unloved, valuations can become attractive, even with the fear hanging over.
And a stock moving from being unloved to loved can create a great momentum play for investors. Today, many retail stocks are trending higher, overcoming fears of a slowing economy that have weighed on the space for the past few years.
One big retail player trending higher is Target (TGT). They reported a beat on earnings and revenues for the fourth quarter of 2023, and see improvements moving into 2024 as they work to reverse their first drop in sales since 2016.
Shares are now up over the past year, but have still lagged the overall stock market. The company’s earnings suggest that gap will continue to narrow.
Target trades at 20 times forward earnings, a slight discount to the overall market. And the company trades at an attractive 0.7 price-to-sales multiple. That points to further upside ahead for shares relative to the overall market.
Action to take: Target shares have momentum, and can likely continue to trend higher in the months ahead. Plus, at current prices, Target also pays a solid 2.8 percent dividend.
For traders, the July $185 calls, last trading for about $5.15, could see mid-to-high double-digit returns on continued momentum higher.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.