Due to the Coronavirus pandemic, businesses have been having many problems. They are facing great losses in sales and consequently, revenue. Due to this, the stock market has also been very volatile. Even market experts are keeping their expectations of revenue low. If a company beats expectations with Q1 earnings, its stock price goes up. But if a company falls short of expectations, its stock price plunges.
Many analysts were expecting Target to do well during this period. The American retailer is one of the few businesses that has been open during the pandemic. Since they also sell many essential products, analysts were expecting that their sales would not fall as much as other businesses.
Target Beats Revenue Expectations
Target released its Q1 earnings on Wednesday, 20 May 2020. The company beat many market expectations. Net Income was down to $284 Million in the quarter, which is 56 cents per share. In Q1 of 2019, the company had a net income of $795 Million, or $1.53 per share. Total revenue of the company, however, was up by 11.3%. The total revenue in the quarter for Target was $19.62 Billion. This is higher than the market expectation of approximately $19.02 Billion.
Target Stock Falls
Despite the rise in revenue and favourable profits for Target, the company still saw a plunge in its stock. The stock opened at a price 124.20 USD. But then, the stock proceeded to fall throughout the day and closed at a price of 119.71 USD. This was a fall of 3.99 USD or 3.2% on the day. This was slightly surprising to market experts as they were expecting the stock to rise after a positive Q1 report.
Why Did The Stock Fall?
It is difficult to explain why the stock price fell after a positive financial report. It is possible that investors might be concerned about the stark fall in net income. Target also did not provide financial guidance. Thus, investors are still not clear about the impact that Coronavirus is having on Target. Another concerning factor is that Target’s stock fell in a week during which the overall market is rallying due to news of lockdowns being rolled back in many parts of the United States.