Is Target Still Killing Wal-Mart? (TGT, WMT)

Douglas A. McIntyre

Target Corp. (NYSE:TGT) reports earnings on Tuesday, and it traded up with the broader market today.  Shares closed up 2.3% at $61.18.  First Call is expecting EPS to be $0.80 on revenues of $14.7 Billion.  As far as the next quarter, estimates are $0.67 EPS on $15 Billion in revenues.  Wal-Mart (NYSE:WMT) already warned and with the huge wide back-to-school price cuts it instigated you just have to wonder if ‘Waldemart’ managed to burn the neighbors’ village and poisoned their well too since they are having village problems.

Target analysts are still favorable on the stock and the average stock target is $72.00 or so.  Its chart has been weak with the broad market, with the key difference being that so far is hasn’t pierced that $57 to $58 support that has been in place over and over for the last 9 months.  It appears that options traders as of today’s close are braced for an underlying stock move of nearly $3.00 in either direction.  Target has been hurting Waldemart, but the question is if the slightly more upscale customers and cleaner format stores are more cause and effect or if they are victim of the recent credit woes as well.

Wal-Mart (NYSE:WMT) managed to do the unthinkable today.  It closed down.  Granted it was only by a whole penny, but if you look up at the DJIA tape you’ll see the DJIA closed up 233 points after Bernanke & Co trimmed the discount rate.  We have been readdressing the issue that Wal-Mart may have to start rethinking the role of Lee Scott as Chief Sith Lord of the company.  It isn’t fair to blame a soft economy on him and we aren’t naive like that, but when things are able to turn for the better the retail beast needs to have a team in place that can take the stock higher.  We sure thought they were trying to be shareholder friendly after its annual meeting, but those efforts have failed and its recent earnings woes have changed the tone against much hope right now.  They also suckered a bunch of analysts into upgrading the stock.

Jon C. Ogg
August 17, 2007

Jon Ogg can be reached at; he produces the 24/7 Wall St. Special Situation Investing Newsletter and he does not own securities in the companies he covers.