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A classic cup-with-handle base is often a precursor to a run-up of stock and retailer. Tractor Supply Company (NASDAQ: TSCO ) Creates exactly that type of integration.
The Tennessee-based company specializes in rural lifestyle products including hardware, livestock and pet products, lawn and garden products, fencing, mowers and apparel.
It is the nation’s largest consumer farm retailer. As of September, it operates 2,027 tractor supply stores in 49 states and an e-commerce platform. In October, it bought 81 stores from Orscheln Farm and Home. These will be rebranded as Tractor Supply by the end of next year.
Tractor Supply also owns Betsense by Tractor Supply, a small box specialty supply chain in small and medium-sized communities. It operates 180 BetSense stores across 23 states.
MarketBeat analyst data The company displays a “Moderate Buy” rating with a $235.94 price target and a potential upside of 10.88%.
Analysts expect more store openings
By 2031, he expects Tractor Supply to grow to about 3,000 stores, including BetSense, writes Morningstar analyst Jaime Katz. Over time, the company seems poised for growth, but what about the immediate future?
Shares are up 14.41% over the past three months as the stock began carving out the right side of the cup pattern in September. It rallied to an interim high of $229.81 on December 1 and has been building a handle ever since. The cup-with-handle formation provides an initial entry point before a stock cup base can be recaptured.
The stock fell 1.63% in the past month as the handle formed. You don’t want to see more than a 10% or 15% handle drop in the beginning; It means the system is broken.
Another good sign on the current handle: Trading volume is lower than normal as prices have fallen over the past two weeks. This is particularly relevant as a high volume of sales may signal a lack of confidence among institutional buyers. Instead, this handle (so far) appears to be the result of some mild profit-taking. This will help shake off unconvinced investors and set the stage for eager buyers to acquire shares at lower prices.
But does the current system suggest significant potential for gains beyond what even analysts see?
Shares were trading around $213.27 by mid-day Thursday. This is approximately 7% below a potential buy point near $230. If the handle doesn’t sink further and the stock clears that buy point, the stock could rise more than 10.88%, primarily if a broader market rally also provides a boost.
Sales and income will continue to increase
Do Basics of Tractor Supply Are you saying stocks are poised to rally in the medium term?
The three-year revenue growth rate is 20% and its three-year earnings growth rate is 29%. Revenues have grown 43% to 8% over the past eight quarters. One potential caveat: Revenue growth has slowed from mid-double-digit rates to single-digit rates over the past six quarters. Make no mistake: Sales are still growing at a healthy clip year over year, but less maddeningly than before.
The income is increasing every year. For the full year, Wall Street expects net income of $9.62 per share, an increase of 12%. Next year, it’s expected to rise another 9% to $10.47 a share.
Like many stocks, Tractor Supply’s price action tends to track the broader market. For example, after the company’s most recent earnings report on Oct. 20, the stock advanced in five of the six subsequent sessions. However, due to a new rally in the S&P 500 in early November, tractor supplies also fell. Even its current handle formation coincides with moderate selling in the S&P.
The cup-with-handle base, solid revenue and earnings growth, and future projections make the stock an attractive watch list. Investors should resist the temptation to jump into a promising stock too soon, as their money will be depleted when other stocks rally quickly.
Here’s what you need to ask before you consider Tractor Supply.
MarketBeat tracks Wall Street’s top-rated and best-performing research analysts and the stocks they recommend to clients on a daily basis. As MarketBeat identified Five stocks The best analysts quietly whisper to their clients, buy before the broader market comes in… Tractor Supply is off the list.
While Tractor Supply currently has a “moderate buy” rating among analysts, top analysts believe these five stocks are good buys.
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