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VIDEOTicker Shock: Four Reasons to Hit Target
Wednesday's top stories and stocks with potential to move.
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Asian stocks finished mixed. The Hang Seng ended down 0.39%, and the Nikkei was up 0.59%. Meanwhile, European stocks were a bit of a mixed bag earlier this morning as well. And here in the US, we're currently trading higher.
Here's what I’m focused on this fine hump day:
Target (TGT):
Bull's-eye! The well-known discount chain was out with its first-quarter numbers this morning.
It put up $0.69 a share in the period, which isn’t bad, given the estimate I’m seeing is for $0.59.
My thoughts:
1. This is a sweet spot to play in when it comes to retail, particularly with its good prices and and all the penny-pinching going on out there.
2. This might take some oomph out of activist William Ackman’s push for board seats.
3. Estimates for the full year could get ratcheted up, given the result. If I’m right, that could drive the stock higher.
4. I wouldn’t want to chase the stock in today’s session. I’d note the stock is up a little more than 4% since May 13 .
For my previous take on Target, see my article Ticker Shock: Three Reasons Why Bank Stocks Have Nowhere to Go But Down.
Hewlett-Packard (HPQ):
All eyes were on the California-based company after the close last night to see if its second-quarter numbers would compute. Per the Associated Press:
“Excluding restructuring and other one-time charges, HP earned 86 cents per share. Analysts were expecting a profit of 86 cents per share, but HP said it beat Wall Street's forecast because it included 2 cents per share of charges related to a patent dispute that analysts didn't factor into their estimates.”
Meanwhile, its revenue line came in at about $27.4 billion, which was pretty much in line with expectations.
This is the line my eyes were drawn to in the release (more specifically, in the “Outlook” section):
“HP estimates full-year FY09 revenue will decline approximately 4-5% from the prior-year period.”
Take a gander back at its first-quarter earnings release. In the “Outlook” section was this sentence: “HP estimates full year FY09 revenue will decline approximately 2-5% from the prior-year period.”
Some thoughts:
1. The shares could get a smack on the wrist in today’s session, and perhaps deservedly so. (They took a bit of a hit in after-hours action.)
2. Overall, I think it’s important to keep in mind that the company still trades at a respectable 9.9 times the current-year estimate of $3.71. That’s not too shabby.
3. Insiders: Do you think the shares compute? Then how about sliding some chips into the pot?
4. As of April 30, it looks like the company had more than $12.8 billion smackeroos (cash and equivalents) on the balance sheet. That’s a nice little kitty with which to play and possibly create value.
I think the stock could get a bit of a smack. But overall, I find it really hard not to like these guys long-haul - particularly at under 10 times the current-year estimate. I'd see any sell-off as more of an opportunity.
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