Cowen Issues Pre-Earnings Warning on 2 Major Retail Stocks

Cowen and Company lowered its price target on Target and Walmart

Deputy Editor
Feb 15, 2022 at 10:09 AM
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Target Corporation (NYSE:TGT) is feeling the heat after earning a beat note Cowen and Company yesterday, alongside Walmart (WMT). The analyst in question said both retailers could see potentially disappointing fourth-quarter results during their upcoming reports, thanks to "runaway cost inflation and persistent supply chain issues, as well as deceleration in demand." In turn, the firm lowered its price target on TGT to $265 from $300, and on WMT to $165 from $175.

Target will report fourth-quarter earnings before the open on Tuesday, March 1. A look at the stock's post-earnings history in the past two years shows it settled lower five out of eight times, while averaging a next-day move of 5.1%, regardless of direction. This includes a 6.8% drop in March of last year, and a 12.7% pop in August 2020. 

The majority of analysts are optimistic on TGT. Of the 19 in coverage, 15 call it a "buy" or better, without a single "sell" rating to be seen. Meanwhile, the 12-month consensus price target of $277.68 is a 33.7% premium to last night's close. 

Options traders, meanwhile, have dramatically shifted toward puts. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), TGT sports a 10-day put/call volume ratio of 1.39, which stands higher than all other readings from the past year. In other words, options traders haven't been more bearish during this time period. 

Echoing this, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.10 sits in the 100th percentile of its 12-month range. This suggests short-term options traders haven't been more put-biased in the last year.

TGT was last seen down 0.3% at $207.86, heading for its lowest close since May, should these losses hold. The equity has been on a downward spiral since the 200-day moving average rejected a rally in early January. The security now sports a year-to-date loss of 10.3%, though the $205 level may contain some of this selloff, as it's acted as a floor for TGT in the past. 

 




 
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