Investing

Earnings Previews: Kohl's, Sea, Target

After a rocky premarket session on Friday, the three major indexes managed to trade at least flat at the opening bell. The Nasdaq Composite was up about 1%, the S&P 500 was up fractionally and the Dow was just a few ticks below unchanged, but the blue chips later sank. The tech sector opened up about 1.3%, probably due to a fall in interest rates on the 10-year Treasury to below 1.5%.

In our earnings preview from Thursday, we looked at Berkshire Hathaway, Workhorse Group and Stratasys. Berkshire Hathaway releases Warren Buffett’s annual letter on Saturday, while Workhorse and Stratasys report quarterly results before the bell Monday. A separate preview covers expectations for Lemonade, Nio and Zoom Communications, which report later on Monday.

This edition of our earnings previews includes three companies expected to report results before the opening bell on Tuesday.

Kohl’s

Before markets open Tuesday, department store operator Kohl’s Corp. (NYSE: KSS) will report results for its fourth quarter that ended in January. In 2020, Kohl’s stock dropped about 17%. That may sound bad, but in early April the stock was down more than 75% for the year to date. The even better news for the company is that the share price has increased by about 32% so far in 2021.

A group of activist investors that collectively own about 9.5% of Kohl’s stock has nominated nine people to the company’s 12-person board, and that kicked up the share price by around 8% earlier this week. Since the beginning of the year, several analysts have upgraded the stock to Buy and boosted the price target to an average of $51.43, with a high of $70 a share.

For the fourth quarter, the consensus estimate calls for EPS of $1.01, down 49% year over year, and sales of $5.9 billion, down about 10.3%. For the full year, analysts are looking for a loss per share of $2.43, down 50% year over year, and sales of $15 billion, a decline of more than 20%.

At the current price of around $54, Kohl’s trades higher than its consensus target but about 35% below its high price target. From the current price, the stock trades at a multiple of 20 times expected 2022 EPS and about 16 times expected 2023 earnings.

Sea

Sea Ltd. (NYSE: SE) began its 2020 climb in mid-April last year and added nearly 400% to its share price by the time the year ended. The Singapore-based company offers digital services, including e-commerce, digital financial services and a digital entertainment platform that allows people to play mobile and PC-bases online games. As with Zoom and any number of other digital-first companies, Sea got a big boost from the pandemic-related lockdowns.

The stock also benefits from its position as one of the top 10 holdings in the Ark Fintech Innovation ETF (NYSEARCA: ARKF), one of the 56 stocks in the Ark Innovation ETF (NYSEARCA: ARKK) and one of 57 stocks in the Ark Next Generation Internet ETF (NYSEARCA: ARKW). All told, Ark Investments holds Sea stock worth around $527 million in the three funds.

Analysts are looking for a quarterly loss per share of $0.51, slightly better than the year-ago loss of $0.53, on revenue of $1.9 billion, more than double the $909 million in the prior-year quarter. For the year, the net loss per share is forecast at $2.60, worse than the $2.00 per share loss in 2019, with revenue totaling $5.1 billion, up nearly 75% compared to 2019.

With a consensus price target of $252.84, the stock’s potential upside from the recent price around $235 is about 6.8%. Using the high target, the potential upside is about 37%. The company is not expected to post a profit in 2021 or 2022.

Target

Target Corp. (NYSE: TGT) added more than 40% to its share price in 2020, mainly a result of its increased focus on e-commerce and delivery. Earlier this week, the company announced a deal with Apple that carves out a special area in Target’s brick-and-mortar stores and its online store for displaying and selling Apple products.

Target reports fourth-quarter results before markets open Tuesday, and analysts expect the company to post earnings per share of $2.54 on sales of $27.42 billion. If Target meets those expectations, that would reflect an increase of nearly 50% in earnings per share and more than 17% in sales. For the 2021 fiscal year that ended in January, analysts are looking for EPS of $9.30, an increase of 45% year over year, on sales of $92.7 billion, an increase of 18.7%.

Shares traded near $186 on Friday, in a 52-week range of $90.17 to $199.96. The consensus 12-month price target on the stock is $202.49, implying a potential upside of more than 8% to the current share price. At the high target of $260, the potential upside is nearly 40%.

Based on estimates for fiscal years 2022 and 2023, Target stock trades at multiples of about 21 times and 19 times, respectively, to expected EPS for the two years.