Takeaway: We’re Adding TGT to our Best Ideas list as a short. We’ll be hosting a call Today at 11am ET to review our thesis. Call details below.

The crux of our argument? Wall Street's perception of Target's financial trajectory is more upbeat than Main Street. When the stock glossed over the company's weak 4Q earnings report, it was because Steinhafel (CEO) issued guidance that he hoped the company would grow into if the Company repaired its reputation after the data breach - not guidance that he knew TGT could meet or beat. We don't think that the Street is giving TGT credit for a) a miss this year, and b) another one in 2015.  The reality is that when a customer has a great experience in retail, they tell a friend. When a customer has a bad experience, they tell 20. Just ask JC Penney or Lululemon. Some of these 'fire your customer' events are worse than others, but there's one commonality - they take a very long time to recover.  

We think that TGT will be lucky to earn $3.75 this year, and $4.00 in 2015. The current 15x multiple is about as high as TGT has seen in 5-years - clearly the market is not factoring in a miss. We think that multiple compression alone on a weaker EPS number gets to a $48-50 stock, or $12-13 downside. If we're wrong, then we're looking at about $5 upside. That's about 2.5x to one, which we like on sleepy mega-cap shorts in Retail. 


TGT - ADDING TO BEST IDEAS LIST AS A SHORT *Reminder: Today 11am ET - TGT Bestidea



  1. The biggest risks to current consensus expectations. 
  2. Target's visitation statistics (via one of our proprietary consumer surveys). 
  3. How key competitors are reacting to the opportunity to gain share from Target.  
  4. Target's value proposition compared to the rest of Retail, particularly Wal-Mart. 
  5. Has suffered the same customer attrition fate as Target stores?
  6. Which categories is Target winning? Where is it losing?
  7. Historical margin cycles for Target and other major retailers, and where we are in that cycle today.  


  • Toll Free Number:
  • Direct Dial Number:
  • Conference Code: 917515#
  • Materials: CLICK HERE

For more information contact .

Pop! Pop! Pop! The Social Media Bubble (As Seen From Stamford, Connecticut)

Takeaway: CEO Keith McCullough and the team of analysts at Hedgeye have been out front proactively warning people of the social media bubble.

Pop! Pop! Pop! The Social Media Bubble (As Seen From Stamford, Connecticut) - bubblespopping1


On March 27th, when Wall Street consensus was still goo-goo-ga-ga about all things Social Media (Twitter, Yelp, Facebook, etc) and the bubble was hitting hew highs, Hedgeye CEO Keith McCullough wrote the following in his Morning Newsletter.


I know no one wants to call it a bubble. There’s career risk in calling something what it is...Boom! Crush. This stuff gets real in a hurry doesn’t it?"




(Click here to read the full "Morning Newsletter" from March 27.)


Pop! Pop! Pop! The Social Media Bubble (As Seen From Stamford, Connecticut) - km1


Despite being shrugged off by many a bubble-blinded pundit, he continued to question consensus' conviction that "It's different this time." He's been doing it on television, Twitter, and most importantly, with our customers.


Here he is on Fox Business with Maria Bartiromo advising investors to tread carefully in the market, particularly the Nasdaq.


Here he is again with Bartiromo, questioning an analyst's bullishness on Amazon and saying that AMZN was more likely to have a 2-handle on it than a 4-handle.


Shares of Amazon are down 11% since McCullough made his call.


In another Morning Newsletter entitled, "Accepting Little Bubbles," McCullough had this to say:


Accepting that little bubbles are going to start to pop bigger ones (like, say, the US stock market’s all-time high price) is a process, not a point.


...Having survived (made $ at a hedge fund in down tapes - 2000, 2001, 2002) the Tech Bubble, The LBO and Oil Bubbles (2008), and The Gold and Bond Bubbles (2011-2012), what I have learned about risk managing these suckers is quite simple:


First, they start to make lower-highs. Then the volume on down days eclipses the volume on the bounces (up days to lower-highs)… then bearish catalysts start to pile up… then what was happening slowly starts to happen more than a little – it happens all at once.


Pop! Pop! Pop! The Social Media Bubble (As Seen From Stamford, Connecticut) - km2

Finally, take a look at this brief HedgeyeTV video below from April 4th, where McCullough spells out his concerns about the bubble. Pay close attention to his bearish comments on YELP and note the date the video was shot. (Hat tip to Hedgeye Internet & Media analyst Hesham Shaaban.)


Pop! Pop! Pop! The Social Media Bubble (As Seen From Stamford, Connecticut) - yelp



Do you want to learn more about Morning Newsletter and other Hedgeye offerings? Click here.

Did You See Panera Bread? You Could've Made Money Listening to Howard Penney | $PNRA

Takeaway: It (literally) pays to listen to Howard Penney.

Fast-casual food chain Panera Bread reported earnings and lowered 2014 guidance which sent its shares tumbling 4.4% in after-hours trading Tuesday evening.


Did You See Panera Bread? You Could've Made Money Listening to Howard Penney | $PNRA - pnra


Talk about nailing it.


Yesterday, Hedgeye Managing Director and Restaurants Analyst Howard Penney shot a 3-minute video on HedgeyeTV outlining his bearish case on PNRA and why he added the stock as a "Best Idea" on the short side.


As you can see below, it pays to listen to Penney.


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20 Proprietary Risk Ranges

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Poll of the Day Recap: 80% Would Invest in $AMZN Over $TWTR

Takeaway: 80% AMAZON; 20% TWITTER

Ahead of Twitter’s Q1 2014 earnings report and after Amazon’s earning disaster last week, we put this question to you in today’s poll: You have $1,000,000 to invest in Amazon or Twitter and hold for 5 years. Where do you put it?


Poll of the Day Recap: 80% Would Invest in $AMZN Over $TWTR - amazon

At the time of this post, an overwhelming 80% of voters said AMAZON; 20% TWITTER.

As this AMAZON voter explained, “Twitter can be displaced.  Amazon is the new Wal-mart.” Another echoed that sentiment, “Follow the money. A lot of mine goes to Amazon. None goes to Twitter.”


One AMAZON voter said they really wouldn't buy either, “but if forced to choose, AMZN remains a name that – at some point – could account for over 5% of US Retail Sales. Much easier for some new technology that we haven't heard of yet to disintermediate TWTR than AMZN.”


Conversely, one TWITTER voter said, “Twitter will be bought out; Amazon will have its multiple severely divided someday soon.”


And to put it a different way, as this TWITTER voter noted, “I'd pick Twitter over Amazon, but I'd pick Pinterest over both.”


VIDEO | Real Conversations: Front-Running Front-Runners and Managing Your Emotions

Takeaway: Here are the final two parts of a four part interview between private investor Buddy Carter and Hedgeye CEO Keith McCullough.

In the third of four parts of a wide-ranging interview with Buddy Carter, a private investor and former proprietary trader at Goldman Sachs, Carter and CEO Keith McCullough discuss order flow and high frequency trading.


In this fourth and final part of a wide-ranging interview, Buddy Carter and Keith McCullough walk through why it’s crucial for investors to have a repeatable process.

Eurozone Confidence Wanes; UK Shines

Takeaway: We maintain our marginally bullish stance on European equities over U.S. equities. We like the GBP and EUR against the USD.

This morning we received Eurozone confidence figures for the month of April.  As the charts below show, the data took a step down versus the prior month, and matches confidence figures from the major Eurozone countries that mostly slowed and fell in the April/May period. 


We think this inflection lower is but one data point, but indicative of what could play out as a slower growth environment for the remainder of 2014 as the overhangs of high unemployment rates, anti-Euro sentiment, and a sluggish global economy persist.  We saw moves higher in confidence figures over the last 12-16 months reflecting improved economic and political outlook, which may now be fully priced in.


  • Germany GfK Consumer Confidence 8.5 MAY (8.5 est.) vs. 8.5 prior
  • Germany ZEW Economic Expectations 43.2 APR (45 est.) vs 46.6 prior
  • Germany IFO Business Expectations 107.3 APR (105.8) vs 106.4 prior
  • France INSEE Consumer Confidence 85 APR (88 est.) vs. 88 prior
  • Italy ISAT Economic Sentiment 88.8 APR vs. 89.5 prior
  • Italy ISAT Business Confidence 99.9 APR (99.5 est.) vs. 99.3 prior
  • Italy ISAT Consumer Confidence 105.4 APR (101.2 est.) vs 101.9 prior

Eurozone Confidence Wanes; UK Shines - x. consumer conf

Eurozone Confidence Wanes; UK Shines - x. business conf

Eurozone Confidence Wanes; UK Shines - x. manufacturing conf


From a quantitative perspective, we maintain our marginally bullish stance on European equities over U.S. equities, and signaled early this week that the German DAX broke its TREND level of support. Below we offer up its new levels (see chart below).

Eurozone Confidence Wanes; UK Shines - x. dax


From a policy perspective, we continue to expect ECB President Mario Draghi and the Eurocrats to manage expectations over the medium to long term. On Monday Draghi was reported to have said to a German lawmakers that a QE program is relatively unlikely now. We’ll take the comment at face value and believe that opportunistically Draghi will continue to have QE in his back pocket, which should encourage European equities higher.  We also underline that Draghi is managing his inflation target of 2.0% over the longer term, and already there are encouraging signs that inflation is percolating:

  • Germany Preliminary CPI rose 1.3% in April Y/Y (1.4% est.) and 1.0% prior


We expect interest rates to remain “accommodative” = at the present rate or lower, as the bank works on schemes to better unlock lending to the real economy (especially SMEs).


On the currency front, the EUR/USD is trading in a bullish formation, above its TRADE, TREND, and TAIL levels of support, as outlined in the chart below. We expect the cross to trade higher as Eurozone QE remains on hold and as Fed Head Janet Yellen continues her dovish policy stance.

Eurozone Confidence Wanes; UK Shines - x. eur usd




UK Bulls

The UK economy is following our playbook:  tighter monetary policy = stronger currency = stronger purchasing power, home price appreciation, and confidence.  UK GDP ramped to +3.1% Y/Y in Q1 (double what we’ve forecast in the USA). 


BOE Governor Mark Carney recently said that he’s optimistic about the economy’s recovery, comfortable with the current level of interest rates, and reiterated that when it does see increases in interest rates they will be gradual and limited. This week Lloyd’s Business Barometer showed a meaningful move higher, to 66 in April vs. 44 in the prior reading.  


We remain bullish on the equity market (despite being essential flat YTD) and the GBP/USD.


Our bullish levels on the GBP/USD are outlined below:

Eurozone Confidence Wanes; UK Shines - x. pound


Matthew Hedrick


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