Is it safe to buy Target stock as shares fall despite posting solid Q3 results?

On Wednesday, Target Corp (NYSE:TGT) shares plummeted by more than 5% despite reporting solid fiscal third-quarter results. The company announced its most recent quarterly results before markets opened, beating the consensus forecasts for revenue and earnings. However, Target’s profitability margins failed to impress despite rising unit prices.

The company posted FQ3 non-GAAP earnings per share of $3.03, beating the consensus for analyst estimates of $2.80. On the other hand, its GAAP EPS of $3.04 also outperformed the expectation of $2.77, while revenue for the quarter increased by 13.3% from the same quarter in 2020 to $25.65 billion, $1.09 billion ahead of the Street forecast.

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 Despite Wednesday’s pullback, Target shares are still up more than 42% this year, thus outperforming the S&P 500 Index, which has gained just under 28%.

Is TGT a safe bet?

From an investment perspective, Target shares trade at reasonable trailing 12-month and forward P/E ratios of 20.15 and 19.44, respectively. Therefore, the stock could be an interesting choice for value investors.

In addition, Analysis expect the company’s earnings per share to grow by 36.30% this year, before rising at an average annual rate of 14.70% over the next five years. As a result, TGT could also gain the attention of growth investors.

Technically, Target shares seem to have recently pulled back to break out of an ascending channel formation in the intraday chart. However, the stock appears far from reaching the oversold conditions of the 14-day RSI whilst retaining some distance above the 100-day moving average.

Therefore, investors could target extended short-term declines at about $243.37, or lower at $230.27, while $265.09 and $275.54 are crucial resistance zones.

The pullback could continue

In summary, with Wednesday’s revenue and earnings beat failing to initiate a bull-run, Target seems poised for more downward movement.

Therefore, with the stock far from reaching oversold conditions, it may not be too late to take some profits from this year’s gains.

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