Target Hits Earnings Bullseye: TGT Taps 52-Week High & Offering Options Trade

on Schwab Network. Tobacco Morning Train Live. Let's go inside out on target's latest earnings report. Joining us now is Greg Portal who's the lead partner Global Markets at Kearney. Greg nice of you to join us. Thank you so much for your time. So it looks like the turnaround wheels are in full swing. Now. Just walk us through your reaction to what we heard from this company. Well, there are two things that were really exciting with the target news today. One, the transformations affecting both the top and the bottom line. A lot of times when you see these turnarounds, there's too much emphasis on just cost cutting. But in the target case, they've been able to strengthen both their consumer activation and revenue line, as well as the cost line. And then the second big point is they're doing this by focusing on being a retailer. Well, we've seen retail turnaround stories before. It's typically around, oh, can they monetize real estate. Are they going to do some sort of financial engineering to split the.com from the from the legacy business? But in target's case, they've been very effective at being a retailer doing what matters to win customer dollars at store. Yeah, it's interesting you raise the.com versus the bricks and mortar sort of in-house retailer, because I was actually looking for a pair of shoes this morning because it has these tie ups with all these brands, and you could only buy it online, which doesn't really help me because I don't really know my size. But yeah, you raise a really interesting point. How sustainable do you think this is? I mean, you know, as far as the upcoming holiday season, you know, as far as the run of the success we've already seen in this one? Well, management was clearly very bullish when they started to raise the expectations for full year results. So they're looking into the holiday season with some strength. And there's two things that would support that. One, a lot of the changes that they've been able to make are fundamentally changes. They've made stronger commitments to merchandizing. They've emphasized the AI investments. They've gotten smarter with how they deploy and develop retail media. So these are capabilities that last beyond a particular quarters up, up and down. So that's one part that's really been successful for them. The second part is they've been able to drive store traffic and customer engagements. There has to be some optimism that they're going to be able to keep that customer through the holiday season. That's bullying results. Yeah. And what does this tell you ultimately about the consumer right now? Because, you know, they're being what the market likes to say is choiceful. They are they are very choiceful, which is sometimes frustrating for management teams. But I think what the target story tells us, and it's been reinforced by other earnings through the season. There is consumer strength. Now. There's consumer angst in terms of they're very nervous, they're very concerned. But at the same time there are gains to be found and there are dollars to be won. And it's also important to realize that the target story isn't being done in a vacuum. They are taking dollars off the shelf from other retailers, and the question will be which retailers aren't going to be able to keep up with them. And that's going to pay the price going into the last quarter. Does it give us any clues about what we're likely to hear from Walmart? I don't think it necessarily tips the hand there, because you're talking about two retailers that have a lot of strengths. The question is going to be in the secondary and tertiary market on how much the the second and third level companies are suffering. Understood. Okay. Good point. Really appreciate it. Thanks so much for that. Breaking down those earnings from target this morning. We see a nice reaction up 5%. Greg Portell there lead partner Global Markets over at Carney. Let's trade it now with Tom white host of Fast Market a good showing for target Lowe's as well. But just walk us through an example. Trade for this one Tom. Well looking at these gains that we've seen just you know going into the report now it's reversed. It's gone higher. How do you look at this if you're maybe an investor going, boy, I missed this move. Well, here's a strategy that you can use to maybe buy the shares lower. And if it doesn't go lower, if it doesn't reverse, you can still be profitable on this type of trade leveraging the option market here. So I looked at a cash secured put. I went out a couple of weeks until expiration September 4th weekly option. So about 16 days until expiration. And I just sold a cash secured put it's neutral to bullish in stance. I'm selling the put that's out of the money to the downside. The 155 put in the September 4th weekly option series. You're going to collect a credit of roughly about $2.40, maybe a little bit less. But that credit you collect is what you can profit on this type of trade, $240 per put that you sell. If the stock remains above 155 right now, if the stock goes below 155, you're going to have assignment risk where you might have to buy the shares. But where are you buying the shares. If you collected 240 credit your break even on this one to the downside. 152 60 that's about 4.5% below the current share price, which is just above $160 a share. So this is a two fold type of position where maybe you missed the run up, but you'd still like to participate if the stock pulls back. And if it doesn't pull back and it doesn't go below. 155 hey, I can still be profitable. And this can be one of those strategies you can use over and over again on a weekly basis, on a monthly basis, you pick that level where you're willing to buy the shares if the stock does reverse and go lower, and if it doesn't, you can just still be profitable every time you sell an out of the money, cash secured, put on this. Now, I mentioned the break even 152 60 to the downside. That's about 4.5% below the current share price. The probability that the 155 strike at expiration over the next 16 days will be out of the money at expiration is about 67% at this point. So if you're just doing this to collect credits, you've got a better probability of success on this one. One way that you can look at this type of strategy is say, okay, you know what? I'm going to put $152.60 bid in to buy shares, to buy 1000 shares, right? Or you might not ever get filled on that trade, right? It might not ever go back down to 152 60. But if you sell a cash secured, put like this one where you're break evens 152 60, where if the stock goes below 155, that's where you're going to be purchasing the shares. Cash secured put may make more sense in this type of strategy. Hey look a nice gain today up 5%. It had a big run into the print as well up almost 60%. So a nice day for target. Really