How CVS Just Hurt Target Stock

There’s a worker shortage in the U.S. right now.

Walk down the street – almost every store has a “help wanted” sign in the window.

Go out to dinner, and you’ll likely have to wait thirty minutes before ordering your first round of drinks.

Hell, I’ve been known to walk into a store, look at the line for self checkout, and turn right back around and go home.

The problem is obvious. And in this morning’s earnings report, CVS Health Corp. (NYSE:CVS) announced plans to do something about it.

Earnings beat analyst expectations. But that’s not the part of the report in focus today.

The drugstore announced plans to raise wages for employees and cut education requirements for candidates in a move that may help CVS compete with other retailers for workers.

But investors aren’t impressed.

CVS opened $4 lower this morning. Why? Well, higher wages for workers means that the company is investing in future growth – not increasing dividend payments or share buybacks.

CVS isn’t the only stock that’s going to hurt either.

Think about it – there is a CVS in almost every Target store across the country…

Meaning the mega-retailer could feel the pain as well.

Target Corp. (NYSE:TGT) has been rocking and rolling higher for the past few months. I mean, it’s up 47% year-to-date and has more than doubled over the past year:

TGT YTD, courtesy of stockcharts.com

But at over $260 per share, this stock has finally reached a point where traders are willing to sell.

As people take their money and run, TGT could see the wrong side of $260 ahead of earnings on August 18.

But this is good news for us as traders – because I have a trade with potential to profit by then.

The August 13 $260 puts are only about $2.15-$2.20 right now. And if TGT drops like I expect, this trade could practically double to $4.00 or more in the next seven trading days.

Now, if I’m wrong and TGT gets up to $264 or $265, then I’d bail out of this trade at about $1.

But this CVS news is bad for brick-and-mortar retailers like TGT – and I expect to rake in 100% on this trade next week.

Mark’s Watchlist

  1. iShares Russell 2000 ETF (NYSEARCA:IWM)

The small-cap IWM has been a great indicator lately for the broader market’s moves. That said, I’m watching how the Russell 2000 performs over the next few days to see whether we can expect a correction – or an uptick – in the S&P.

  1. Robinhood Markets Inc. (Nasdaq:HOOD)

I told you to stray away from the HOOD IPO last week. But now that we’ve seen the stock jump 83% higher from its IPO price, 38% of which occurred today at the time of writing, I’m ready to play some HOOD options.

Which just listed today, in fact. Keep an eye on your inbox for some HOOD trade ideas soon!

  1. Clorox Co. (NYSE:CLX)

CLX was a pandemic-favorite stock. But it’s dropped notably since the early days of COVID-19.

After yesterday’s pre-market earnings miss, the stock dropped 10% at the open. It’s clear that investors don’t like this name right now.

But I’ve got a hot take for you. Things at Clorox aren’t that bad. And I think a dead cat bounce could be in play here. The stock could go higher from here. It’s at a point now where it’s going to start drawing interest from a lot of traders – and I’ve got this name on watch.

  1. Starbucks Corp. (Nasdaq:SBUX)

SBUX has spent the last week trading lower. Over the past five days, in fact, it’s down almost 4%:

SBUX July 29-August 4, courtesy of stockcharts.com

Now, I don’t think this bearish slide will last long-term. But I do think the stock has a little bit of downside left before it reverses. And I’m looking to play that with the August $116 puts for about $1.20. If SBUX drops to $117, that option will hit two bucks for an almost 70% gain.

  1. Snap Inc. (NYSE:SNAP)

SNAP is a name I saw making a run above $80 – but that’s a move that’s failed to materialize as the stock gets softer and softer.

And now, big money has come in to say that the social stock is going to continue its trend lower.

We’re looking at two massive put buyers – one in the September $70 puts and one in the September $65 puts:



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Both of these trades are overtly bearish. And I agree – I could definitely get short this thing. I’m looking at the August $70 puts for $1.60.

Today’s Impact Money Trade

I’ve got my eye on a giant trade in Apple Inc. (Nasdaq:AAPL) to the tune of about $16 million:



Click To Enlarge
Someone bought the October $145 straddle, looking for AAPL shares to move over $12 away from the $145 strike between now and October.

That’s a shot to $160 or a fall back below $135. And with AAPL’s inability to pounce off its earnings, I wouldn’t be surprised to see a drop.

Now, we opened puts on AAPL at the end of last month. I told you then to exit if these puts dropped to $1.25 – a move that they made, signaling an exit on this trade.

If you haven’t exited our AAPL August 6 $145 put, then now’s the time to do so.

But we aren’t done with AAPL yet. We may roll these options over. Because I believe there’s further downside coming in the big-tech stock, and I don’t want you to miss out on the money-making opportunity there.

VIX Light

A yellow VIX means that we’re expecting a big move… in either direction.
I don’t expect a dramatic drop in the market this week, but I wouldn’t be shocked if that’s exactly what happens. We could blow higher or lower. And that’s why a yellow VIX typically means be careful.

We talked about volatility during yesterday’s live trading session. You can catch a replay right here.

Keep an eye out – we’ve got more trading action coming soon!

Until tomorrow,


Mark Sebastian


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