Chronicle Journal: Finance

2 Retailers Breaking Out to New 52-Week Highs

With online sales continuing to be a key channel for the retail industry and rapid COVID-19 vaccinations driving increased foot traffic in physical stores, retailers are increasingly optimistic about returning soon to the pre-pandemic normal. Prominent retailers CVS Health (CVS) and Target (TGT) have been strengthening their online presence to stay ahead of their peers and grab more market share. As such, shares of the two companies have recently soared to new 52-week highs and we think are well-positioned to capitalize on the industry tailwinds and gain more traction in the coming months. So, read on to learn more.

Amid a rapid COVID-19 vaccine rollout, declining average daily coronavirus cases and more cities and states eliminating pandemic restrictions, the retail industry has received a major boost this year. With consumers eager to spend money they have saved during the pandemic, there is little doubt that retail sales could soon eclipse pre-pandemic levels. Investors’ confidence in the retail industry is evident from the SPDR S&P Retail ETF’s (XRT) 11.3% returns over the past three months versus the SPDR S&P 500 Trust ETF’s (SPY) 7% gains over this period.

Since the pandemic-driven boost to online shopping is not expected to taper off anytime soon, retailers that have or will enhance their omnichannel capabilities are well positioned to witness sustained growth in their digital sales. With the economy experiencing a faster-than-expected recovery and consumer spending buoyed by an infusion of stimulus payments, the retail industry appears to be on the cusp of a comeback year.

Therefore, we think it is wise to invest in shares of leading retailers CVS Health Corporation (CVS) and Target Corporation (TGT). Their stocks have recently hit their 52-week highs, and both the stocks are well positioned to keep soaring.

Click here to checkout our Retail Industry Report for 2021

CVS Health Corporation (CVS)

Formerly known as CVS Caremark Corporation, CVS provides health services in the United States. The company's Pharmacy Services segment offers pharmacy benefit management solutions, formulary management, retail pharmacy network management, and mail order pharmacy. As of December 31, 2020, it operated approximately 9,900 retail locations and 1,100 MinuteClinic locations, along with online retail pharmacy websites, LTC pharmacies, and onsite pharmacies.

Last month, CVS launched CVS Health Ventures, a dedicated corporate venture capital fund that will invest in high-potential, early-stage companies focused on making health care more accessible, affordable, and simpler. This venture should help accelerate the company’s growth and help CVS deliver strong returns consistently.

CVS’ total revenue increased 3.5% year-over-year to $69.1 billion in the first quarter, ended March 31, 2021. Its operating income grew 3.5% from the year-ago value to $3.58 billion, while its net income increased 10.4% year-over-year to $2.22 billion over this period. The company reported an EPS of $1.68 for this period, as compared to an EPS of $1.53 in the prior-year quarter.

A $70.31 billion consensus revenue estimate for the current quarter, ending June 2021, represents a 9.5% improvement year-over-year. The $1.86 consensus EPS estimate for the next quarter, ending September 2021, represents a 12% increase from the same period last year. The stock has gained 41.7% over the past year.

Currently trading at $89.71, the stock hit its 52- week high of $90.61 on May 24.

CVS’ POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CVS is also rated a B in Sentiment, Stability and Value. Within the B-rated Medical - Drug Stores industry, it is ranked #1 of 5 stocks. To see additional POWR Ratings for Growth, Momentum and Quality for CVS, Click here.

Target Corporation (TGT)

TGT is a leading retailer in the United States. It offers general merchandise, such as food assortments, beauty and household essentials, apparel, electronics, etc. It also provides in-store amenities, such as Target Optical, Starbucks, and other food service offerings. As of January 30, 2021, the company operated approximately 1,897 stores.

Last month, TGT introduced a new installment of its limited-time-only Designer Dress Collection, featuring three celebrated designers: ALEXIS, Christopher John Rogers and RIXO on Target.com and in select Target stores this spring. In addition, the collection will be available via Target’s contactless same-day pickup options, including Drive Up and Order Pickup. This new installment should substantially increase TGT’s revenue in the near-term.

In the first quarter, ended May 1, 2021, TGT’s sales increased 23.3% year-over-year to $23.88 billion. Its total revenue increased 23.4% from the year-ago value to $24.2 billion, while its operating income grew 407% year-over-year to $2.37 billion. The company reported $2.1 billion in net earnings, representing a 639.8% increase year-over-year. Its EPS increased 643.2% year-over-year to $4.17 for this period.

Analysts expect TGT’s revenue for the current fiscal year, ending 2022, to be $98.85 billion, representing 5.7% year-over-year growth. The company’s EPS is likely to increase 22.2% year-over-year to $11.51 in the current year. TGT has gained 89.7% over the past year.

Currently trading at $225.41, the stock hit its 52- week high of $228.50 on May 24.

It is no surprise that TGT has an overall A grade, which equates to Strong Buy in our proprietary ratings system. It has a B grade for Sentiment, Value and Quality. In the A-rated Grocery/Big Box Retailers industry, it is ranked #2 of 39 stocks.

In total, we rate TGT on eight different levels. Beyond what we’ve stated above, we have also given TGT grades for Momentum, Growth and Stability. Get all the TGT ratings here.

Click here to checkout our Retail Industry Report for 2021


CVS shares were trading at $88.97 per share on Tuesday afternoon, down $0.74 (-0.82%). Year-to-date, CVS has gained 32.00%, versus a 12.29% rise in the benchmark S&P 500 index during the same period.



About the Author: Samiksha Agarwal

Samiksha Agarwal has always had a keen interest in financial markets. This has led her to a career as a financial journalist. Through her extensive knowledge of fundamental analysis, her goal is to help investors identify untapped investment opportunities in the stock market.

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