‘Tis the Season to Play the Uptrend in Retailers

Just as the autumn months are weak for the market, the final few weeks of the year tend to bode well for stocks. They tend to fare best for retailers, amid the rush of the holiday season. December has historically made the difference for a retailer earning a profit for the year or not.

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  • Many retailers are starting to come heavily off their lows, but have more upside ahead through the holiday season. That’s especially true for the most beaten-down companies.

    Among the big-box retailers, Target (TGT) has been hit the hardest. Yet in their most recent earnings, the company fared better than analysts expected. If the holiday season isn’t too bad, shares should continue higher in the next few months.

    Even with the latest bounce, shares are still down 15 percent over the past year, underperforming the S&P 500 by nearly 30 points.

    Meanwhile, shares trade at under 15 times earnings, still leaving shares inexpensive enough to move higher during the holiday retail season.

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  • Action to take: Investors may like shares here for further upside. The stock yields just under 4 percent at current prices, at the higher end of the retail space.

    For traders, the January 2024 $140 calls, last going for about $2.50, could see mid to high double-digit returns in the coming weeks on a further trend higher for shares.


    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 of the companies mentioned in this article.

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