After beating Wall Street's earnings estimates in each of the past three quarters, can Target (NYSE: TGT ) make it four-for-four? The retailer that put fashion back in the bargain bin aims to start off the new year with a bang when it reports Q1 2007 earnings tomorrow.
After the news comes out, we'll have time aplenty to dissect it. But in these few hours before we begin obsessing over Target's short-term progress, let's take a moment to review what investors think about it as a long-term investment. Our tool in this endeavor: Motley Fool CAPS, where we poll more than 29,000 rated investors for their views on more than 4,000 companies, Target among them. Here's what Fools have to say about the company.
Up or down?
More than 800 investors have submitted ratings on Target. Their verdict: This stock hits the spot.
A full 93% of CAPS investors expect Target to outperform the market. But a funny thing happens when you drill down to our very best investors -- only 88% of CAPS All-Stars endorse the stock. Hmm. That's still enough to garner four stars out of a possible five, but it's a significant enough difference to give this Fool pause.
Moreover, most of the retailers grouped with Target on CAPS also get four stars (with one notable exception):
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Retail Group
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CAPS Rating
|
|
Target
|
****
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Walgreen (NYSE: WAG )
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****
|
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CVS (NYSE: CVS )
|
****
|
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Costco (Nasdaq: COST )
|
****
|
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Sears Holdings (Nasdaq: SHLD )
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****
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Kroger (NYSE: KR )
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****
|
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Wal-Mart (NYSE: WMT )
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**
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Wall Street vs. Main Street
Wall Street plays the part of the "dumb money" on this one -- relatively speaking, and no offense intended to our not-yet-All-Star players. Rather than mimic the skepticism of the best CAPS investors, professional analysts actually outdo the enthusiasm of the bottom 80%, giving Target a unanimous, 12-out-of-12-analysts-polled thumbs-up. Meanwhile, the stock has underperformed the S&P 500 by about two-and-a-half points over the past 52 weeks.
Bull pitch
For the bull thesis on Target, we turn to the top-rated CAPS player of all time, the venerable TMFEldrehad, who calls Target "[a]nother one of Mrs. Eldrehad's favorite stores" before explaining:
I think there will always be a certain segment of the population that wants something just slightly more "upscale" than can often be found at Wal-mart. This, combined with a greater selection than can usually be found at warehouse stores like Costco, should lead toward profitable growth for some time to come.
Bear pitch
Only three All-Star players have posted pitches critical of Target. Surveying their comments, we find them warning that some of the things Target sells are "becoming expensive" (helping margins, one imagines, but perhaps scaring away discount shoppers), that the stock itself looks expensive (although this was said when the shares were trading for $60), and that rising gas prices and the fallout from the subprime lending fiasco will pinch consumers and hurt the entire retail sector in the near term.
Who said that?
To learn the identities of these bearish Fools, and how well their records stack up against top-rated TMFEldrehad and his eternal optimism, just click here.
Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 622 out of more than 29,000 rated players. Wal-Mart is an Inside Value selection. Costco is a Stock Advisor pick. The Fool's disclosure policy is always on target.
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