The past decade has seen retailers shift heavily into online sales. While there’s still demand for many goods at brick-and-mortar stores, investors are more willing to buy online.
Catering to that growing demand in new and innovative ways can give any retailer an opportunity to profit over time. It also means a retailer can continue to expand their market share as the world goes increasingly digital.
Discount store chain Target (TGT) has been shifting with digital trends in recent years. Now, it’s partnering with Shopify (SHOP) to improve its e-commerce experience.
The fit looks like a natural one, and could boost Target’s online sales and increase Shopify’s revenues.
Target has lagged the overall market, rising about 9% over the past year. Shares trade at 16 times earnings, also a discount to the market.
Action to take: At its current valuation, Target looks undervalued and ready to trend higher. Improved earnings and online sales from partnering with Shopify could also lead to increased growth in the quarters ahead.
At current prices, Target also pays a 3.1% dividend, which it has a history of growing over time.
For traders, Target shares look ready to trend higher in the coming weeks. The September $160 calls, last trading for about $4.10, could see mid-to-high double-digit returns on a further rally.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.