Stocks in the News: Target Stores Miss the Mark

Posted: Sep 18, 2013 12:01 AM

Stock number one is:

Outerwall Inc., (SYMBOL: OUTR) and the headline says: Redbox operator Outerwall slashes forecast -- Reuters

Outerwall Inc., owner of Redbox DVD kiosks, stunned Wall Street today with major downward revisions of third quarter and full-year earnings estimates, as promotional discounts impacted revenue growth.

The company expects no earnings growth, while Wall Street had expected 22% growth. The stock sold off today, losing all its gains for the year. Based on revised earnings estimates, the PE is 10.

Outerwall plans to repurchase $100 million of stock, which should help solidify share price support around $47. Despite a very low PE, without any earnings growth in sight, we would find a good exit point and move on to a growth stock.

Our Ransom Note trendline says: SELL OUTERWALL IN THE MID-$50’S.

OUTR Chart

OUTR data by YCharts

Stock number two is:

Target Corp., (SYMBOL: TGT) and the headline says: 3.1 Phillip Lim for Target Collection Sees Strong Demand – Citi Research

Target rolled out its new fashion collection from award-winning designer Phillip Lim on Saturday. Analysts visiting a Target location noted that almost all the Phillip Lim clothing sold immediately, and handbags completely sold out online. Mr. Lim has a celebrity following, and is now designing an exclusive line for Target.

We’ve been cautious on Target stock all year. The company has been plagued with earnings misses, now projected down 9% for the year.

After climbing steadily this year, the share price fell $10 in the summer, and seems to be finding support around $63/$64. Bargain hunters could jump in here, but we’d rather look for companies with more consistent earnings growth.

Our Ransom Note trendline says..... HOLD TARGET.

TGT Chart

TGT data by YCharts

Stock number three is:


Take-Two Interactive Software Inc., maker of entertainment for gaming systems and pc’s, has released its latest video game, “Grand Theft Auto V”. S&P says, “We expect Grand Theft Auto V to break video game sales records based on the quality of the game, the number of pre-orders, and strong positive reviews.” Take-Two is expected to sell 26 million copies of the game through March 2014, and to recoup its original investment four-fold in the first month.

S&P expects Take Two to earn $2.80 per share in fiscal year 2014, which ends in March, and $1.20 in 2015. The PE is only 6, and the 2015 PE is 14, so either way, the stock is undervalued.

The stock broke out on the upside in August, and will likely trade between $16 and $21 near-term. Aggressive growth investors should take a second look at Take Two.

Our Ransom Note trendline says.... BUY TAKE TWO INTERACTIVE SOFTWARE.

Stocks in the News is produced by Ransom Notes Radio and Goodfellow, LLC. Crista Huff manages Goodfellow LLC, a website that recommends outperforming stocks using fundamental and technical analysis.