TGT's first-quarter adjusted profit fell short of the consensus estimate
Shares of Target Corporation (NYSE:TGT) are down 5.3% to trade at $71.46, after the retailer reported a first-quarter adjusted profit miss of $1.32 per share, as operating margins weakened after the company invested heavily in its online business in order to compete with Amazon and Walmart. The results weren't all bad, though, with same-store sales and overall revenue coming in above estimates.
After racing higher from its mid-November lows near $54 to its late-January high of $78.70, TGT stock's price action has been choppy. While the $69-$70 level has emerged as a floor -- home to a 38.2% Fibonacci retracement of that recent rally and the equity's 120-day moving average -- the $77-$78 region has served as a ceiling, an area that resides near Target's 20% year-to-date return. Today's move lower has TGT testing the lower end of this range, though the equity has not closed below its 120-day trendline since Nov. 28.
It looks as if options traders were bracing for post-earnings downside. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TGT's 10-day put/call volume ratio of 0.88 ranks in the 88th annual percentile. While the bottom-heavy ratio shows more long calls than puts were initiated on an absolute basis, the elevated reading points to an unusually heavy rate of put buying.
This skepticism is seen elsewhere on the Street. For starters, although short interest edged down in the most recent reporting period, there are still 39.66 million TGT shares sold short. This represents a healthy 7.3% of the stock's available float, or 10.3 times its average daily pace of trading.
Plus, of the 17 analysts covering Target stock, 13 maintain a "hold" or "strong sell" suggestion -- and UBS analyst Michael Lasser told CNBC earlier to "wait and see" before buying the retailer. Echoing this, the average 12-month price target of $76.78 stands just above current trading levels.