Target (NYSE: TGT) made new highs following an exceptionally strong Q3 earnings report. While most retailers and many parts of the economy were ravaged by the pandemic. Target is one of the companies that saw its business take more market share and is emerging from a stronger position.
Unlike some of the companies that have also benefited from the pandemic like Zoom (Nasdaq: ZM) or Amazon (Nasdaq: AMZN), Target is likely to see further gains as the world reopens. In contrast, companies like Zoom or Amazon may see some deceleration with the world returning to normal assuming that the vaccine works and is effectively distributed.
Inside the Numbers
Essentially, Target will benefit from the vaccine helping the economy further improve which would lead to increased consumer spending. Additionally, retail foot traffic returning to 2019 levels would be another catalyst. However, Target also made significant strides in e-commerce. This is evident in its Q3 report as its online sales increased by 155% which resulted in a 500% increase in curbside deliveries and a 280% increase in shipments.
Target has also benefited since it's an "essential business" which resulted in same-store sales increasing by 9%. With so many retail stores beleaguered by the coronavirus, Target is one of the few places to go for electronics, apparel, toys in addition to food and staples.
All of these positive developments are clearly reflected in Target's results. Earnings per share came in at $2.79 which topped analysts' expectations of $1.60 and was 98% above last year's $1.37. Revenue also beat at $22.6 billion vs expectations of $20.9 billion. This was a 21% increase from last year. Overall, taking into account online sales, same-store sales were 21% higher.
Target's results are more impressive than peers like Walmart (NYSE: WMT) or Kroger (NYSE: KR) whose businesses have also prospered during the pandemic. However, Target's had the largest gains, by far. It's now the third-largest eCommerce merchant in the US with 9% share. However, its growth rate is significantly higher than Walmart at #2 or Amazon at #1.
Stock Price Outlook
Target is up nearly 100% from its March lows. It made an all-time high in August and since then, has steadily trended higher. The near-term outlook for Target is promising as it has a number of cyclical and secular trends working in its favor. Investors should look to add shares on weakness.