Authored by Katabella Roberts via The Epoch Times (emphasis ours),

Former President Donald Trump’s company, Trump Media & Technology Group (TMTG) has reached another “important milestone” in its merger with Digital World Acquisition Corp., officials announced on Nov. 13.

In a press release, the two firms unveiled the filing of “Amendment No. 1” to its Form S-4 Registration statement with the Securities and Exchange Commission (SEC).

Publicly traded companies are required to file an SEC form S-4 to register any material information related to a merger or acquisition.

The latest filing included a “preliminary proxy statement” and a prospectus “concerning the proposed merger between TMTG, the parent company of social media platform Truth Social, and Digital World, a special purpose acquisition company,” and “marks an important milestone in the proposed business combination,” officials said.

Digital World entered into a merger agreement with TMTG in October 2022, but the deal has yet to be finalized amid multiple delays, including investigations by the SEC and the Department of Justice (DOJ).

Earlier this year, Digital World reached a tentative settlement of a penalty of $18 million with the SEC to settle charges alleging that the company violated anti-fraud provisions relating specifically to its IPO filings on form S-1 and the S-4 form.

The DOJ also announced charges against a former Digital World board member, Bruce Garelick, and two others who were arrested in June for insider trading related to the proposed merger with TMTG.

Monday’s announcement represents a “crucial milestone in our journey towards the potential merger with TMTG,” said Eric Swider, CEO of Digital World.

“This development highlights our ongoing efforts to provide clear and detailed information throughout this process. Our teams have worked tirelessly to reach this stage, and this achievement reflects their dedication and expertise. We are excited to continue our collaboration with TMTG to bring this merger to fruition,” he added.

TMTG CEO Devin Nunes also called the filing a “monumental milestone,” adding that the company looks forward to working with the SEC to bring the deal to a close as “quickly as possible.”

“Truth Social aims to be more than a social media platform—we aspire to become the centerpiece of a movement, as well as a method for Americans to invest in their freedom,” Mr. Nunes added.

However, the amended S-4 filing also raises concerns regarding the future of the merger.

In a section titled “Risks Related to TMTG,” it notes that “TMTG’s independent registered public accounting firm has indicated that TMTG’s financial condition raises substantial doubt as to its ability to continue as a going concern.”

It also lost $23 million in the first six months of this year, with net sales of $2.3 million. Overall, the social media platform has lost $73 million since its launch in early 2022, according to the financial disclosure.

The filing also states that as of June 30, 2023 and Dec. 31, 2022, “management has substantial doubt that TMTG will have sufficient funds to meet its liabilities as they fall due, including liabilities related to promissory notes previously issued by TMTG.”

“Sufficient funds during this period are directly conditional on completion of the Business Combination by the Outside Date,” the form notes.

“TMTG believes that it may be difficult to raise additional funds through traditional financing sources in the absence of material progress toward completing its merger with Digital World,” the form concludes.

The form also indicates much of Truth Social’s success hinges on President Trump, who controls 90 percent of TMTG and is currently facing a string of legal challenges, including a lawsuit filed by New York State Attorney General Letitia James’s office against the Trump family business.

According to the financial disclosure, if the platform “fails to develop and maintain followers or a sufficient audience, if adverse trends develop in the social media platforms generally, or if President Trump were to cease to be able to devote substantial time to Truth Social, TMTG’s business would be adversely affected.”

Despite the financial disclosure, Digital World shares were up 4.22 percent after hours at $15.82.

The Epoch Times has contacted a spokesperson for Trump Media & Technology Group for further comment.

In addition to publishing scathing reports about companies they suspect of wrongdoing, short sellers are also taking their findings to the Securities and Exchange Commission’s whistleblower program.

After publishing reports, short sellers like Carson Block of Muddy Waters Research, Kyle Bass and Nate Anderson of Hindenburg Research often share their findings with regulators, a new report from Bloomberg says.

Should the Securities and Exchange Commission conduct an investigation and impose a fine, a short seller could be eligible to receive a maximum of 30% of the collected amount. This potential reward is in addition to any gains they may realize from their bet on the stock’s downturn.

The SEC’s whistleblower program is open to everyone, including short sellers, company insiders, and even casual online investors, the report notes.

The allure of this program is evident, with more than 18,000 formal tips received in the fiscal year 2023. To put this in context, this annual figure is twice the sum of all enforcement actions undertaken by the SEC in the previous decade.

The Bloomberg report notes that tips submitted from short-seller research may offer the SEC an early advantage in investigations, but they also may present complex perceptual issues.

Despite the valuable insights they provide, some within the SEC feel uneasy about utilizing information from short sellers, even as it sometimes proves instrumental in significant cases, the report says.

Alexander Platt, a University of Kansas law professor, told Bloomberg: “The center of gravity in this program is shifting to short sellers. I think the taxpayers should know when $14 million of our money goes to Carson Block.”

Bloomberg says that Block received a $14 million reward for one of his contributions, a portion of the over $1.3 billion the SEC has distributed in more than 300 cases since the inception of the program in the previous decade.

Block started providing tips shortly after the program’s launch. In 2022, he earned the $14 million for a tip about Focus Media, a Chinese media company. In 2015, Focus Media and its CEO settled an SEC investigation related to insider dealings for $55.6 million, neither admitting nor denying the SEC’s allegations. The SEC acknowledged that the investigation was largely initiated based on Block’s research.

Block responded: “Many of the really good external fraud detectives are short sellers. If you want the whistleblower program to be open to external whistleblowers, you have to be open to short sellers and can’t discriminate against them.”

Nathan Anderson of Hindenburg Research says he has submitted tips since 2014. He says he prefers to submit tips before he publishes a report. He sends them in where “we suspect fraud,” he said. “We can identify red flags and high-level evidence of fraud, but as an outsider we can’t subpoena or compel the information needed to finish an enforcement-ready investigation.”

Christian Lamarco, who runs Culper Research added: “There’s so little incentive now to root things out, so if you’re providing that, that’s a good thing.”

You can read Bloomberg’s full writeup here. 

Authored by Austin Alonzo via The Epoch Times (emphasis ours),

In a Nov. 12 interview with CNN, Republican National Committee Chairwoman Ronna McDaniel said she would support former President Donald Trump as the eventual nominee if voters pick him.

During the interview on Sunday with CNN’s Dana Bash, the network’s chief political correspondent, Mrs. McDaniel told Ms. Bash she will “support who the voters choose.”

In her segment with Mrs. McDaniel, Ms. Bash, the co-anchor of CNN’s “State of the Union with Jake Tapper and Dana Bash,” began by asking if she found President Trump’s Nov. 11 speech similar to former Secretary of State Hillary Clinton’s infamous “basket of deplorables” remark.

During his speech Veteran’s Day speech in Claremont, New Hampshire, the former president said he pledged to “root out the communists, Marxists, fascists, and the radical left thugs that live like vermin” in the United States.

Ms. Bash asked Mrs. McDaniel to “condemn” the remark, but she replied that CNN can ask President Trump what he meant. The RNC chairwoman redirected, saying the RNC is focused on beating President Joe Biden.

Ms. Bash then asked Mrs. McDaniel if she thought President Trump would be the “appropriate” nominee even if he’s “a convicted criminal.”

“The voters are looking at this, and they think there is a two-tiered system of justice,” Mrs. McDaniel said. “They don’t believe a lot of the things that are coming out in this. And they’re making these decisions. And you’re seeing that reflected in the polls.”

“He’s at 4 percent,” Mrs. McDaniel said. “He’s looking for headlines.”

Instead of attacking one another in a “circular firing squad,” Republicans should be focused on taking on the Democrats.

Ms. Bash also pressed Mrs. McDaniel on the abortion issue. Liberals won a key election in Ohio establishing abortion as a constitutional right in the Buckeye State on Nov. 7.

Ms. Bash said Mrs. McDaniel previously told the press Republican candidates have “lost their messaging on abortion.” She asked what that message should be then.

“I think commonsense limitations is where the country is,” Mrs. McDaniel said. “I think most Americans do think that there should be a limitation when you know a baby feels pain as you’re taking its life at 15 weeks.”

Mrs. McDaniel said Democrats are using fear to drive support for abortion ballot measures. She said Republicans do support lifesaving care for ectopic pregnancies and in vitro fertilization. Still, Democrats are “going on TV and using Roe to scare people and misrepresent Republicans on this issue.”

“I think our candidates have to get out in front of it,” Mrs. McDaniel said.

In a bold demonstration of chutzpah, two current members of Israel’s legislature took to the Wall Street Journal op-ed pages to declare that Western countries should start taking Gaza refugees. This comes as Israel is methodically destroying much of the densely-populated territory that’s home to some 2 million Palestinians, following the stunning and  vicious Oct. 7 attack by the militant arm of Hamas, which rules Gaza.

Look at the images of Gaza before and after Israel’s bombardment.

This is total destruction. Indiscriminate. Not targeted in the slightest.

But here’s the kicker: @JoeBiden SAT IN on the Israeli war cabinet when this was planned.

He KNEW what would happen. He APPROVED it. pic.twitter.com/G2TVLVt7Hw

— Trita Parsi (@tparsi) November 12, 2023

“It is imperative that the international community explore potential solutions to help civilians caught in the crisis,” wrote Danny Danon and Ram Ben-Barak. Danon is a member of the Prime Minister Benjamin Netanyahu’s right-wing Likud Party, while Ben-Barak is a member of the center-left Yesh Atid. The Times of Israel hailed their joint call to export Israel’s problems as “a rare display of cross-party solidarity.” 

Writing as if they’re spontaneously brainstorming, Danon and Ben-Barak say that “one idea is for countries around the world to accept limited numbers of Gazan families who have expressed a desire to relocate.”

Danon and Ben-Barak — who led the Mossad from 2009 to 2011 — cite various historical examples of Western European countries and the United States opening the door to refugees displaced by war, and then declare that “organizations with experience settling refugees should facilitate the relocation of Gaza residents who wish to move to countries willing to accept them…Even if countries took in as few as 10,000 people each, it would help alleviate the crisis.”

Scooping up Palestinian refugees from Gaza would also advance a goal of many Israelis — to ethnically cleanse the territory and allow Israel to readmit settlers, after having removed them in 2005. Such a cleansing goal isn’t a conspiracy theory from the fringes of the internet: Last month, a leaked document drafted by Israel’s intelligence ministry proposed forcing the population of Gaza into Egypt’s Sinai Peninsula. 

While ZeroHedge isn’t able to verify it, this week a video circulated on social media purporting to show Israel Defense Forces soldiers in Gaza declaring they are on a mission of “conquering, expelling and settling.” 

IDF SOLDIERS IN GAZA ADMIT THEY ARE PLANNING TO ETHNICALLY CLEANSE PALESTINIANS

They said they are:

“Conquering, expelling and settling.” pic.twitter.com/aJoi821HkQ

— Sulaiman Ahmed (@ShaykhSulaiman) November 14, 2023

As Dave DeCamp notes at AntiWar.com, “the op-ed drew praise from Bezalel Smotrich, an extremist settler who leads the Religious Zionist party and is Israel’s finance minister.” Smotrich, who has called for Israel to annex the West Bank while barring Palestinians from citizenship, said relocation of refugees was the final “only solution that will bring to an end the suffering and pain of Jews and Arabs alike…Israel will no longer be able to put up with the existence of an independent entity in Gaza.”

On Wednesday, Nov 15 at 7:30pm ET, ZeroHedge will launch a new debate series — with a discussion of the Israel-Hamas war, pitting libertarian podcaster and comic Dave Smith against outspoken Zionist Laura Loomer. Here’s how to watch. 

By Charles Kennedy of OilPrice.com

A federal appeals court has ordered the federal government to hold an oil and gas lease sale for the Gulf of Mexico within 37 days.

It will be the last lease sale for the Gulf of Mexico until 2025, Bloomberg noted in a report.

The obligation to sell drilling rights to the oil and gas industry in the Gulf of Mexico was a stipulation in the Inflation Reduction Act spearheaded by Senator Joe Manchin in exchange for his support for the IRA and its climate stipulations.

The federal government, however, actively looked for ways to avoid the auction, at least in its initial size. Earlier this year, the Interior Department decided to reduce the size of the area to be auctioned to 67 million acres instead of 73.4 million acres, citing the habitat of a rare whale species that fell within the initial area.

The oil industry challenged the decision in court. The judge ruled in favor of the plaintiffs. Noting that the BOEM had failed to justify this last-minute change, District Judge James Cain wrote:

“The process followed here looks more like a weaponization of the Endangered Species Act than the collaborative, reasoned approach prescribed by the applicable laws and regulations.”

Following this ruling, it was time for the environmentalist camp to respond with its own legal challenge, which it promptly did, trying to cancel the lease sale altogether citing the endangered status of the Rice’s whale. The court, once again, sided with oil and gas.

“The oil industry fought tooth and nail to tear up basic measures to save one of the most endangered marine mammals in the world,” George Torgun, an attorney with Earthjustice, told Bloomberg.

“This could be the difference between doing the bare minimum to save this species and allowing it to vanish.”

The American Petroleum Institute welcomed the decision and said it would guarantee the supply of affordable and reliable energy to Americans.

Chinese President Xi Jinping will meet with US President Joe Biden starting at 10:45am Wednesday Pacific time. The US side is giving a state visit-level reception for Xi.

The previously secret venue for the one-on-one meeting between presidents, on the sidelines of the summit of Asian-Pacific leaders, has as of Wednesday morning been disclosed as Filoli, a sprawling private estate located in Woodside, California – which lies about 25 miles south of San Francisco, seen below.

The lush, quiet and secluded estate will be scene of an expected some 4 hours of talks between Xi and the 80-year old Biden.

As we’ve previewed, topics are likely to range from Biden’s efforts to restore military-to-military communications, Taiwan tensions, managing economic competition, Ukraine, Gaza, and also reportedly Fentanyl at the forefront – to be pressed by the US side.

So far, it’s the optics which have proven most controversial, from the moment senior officials – including Janet Yellen – were gathered at the airport to greet Xi’s huge Air China jet on Tuesday. Biden had this to say going into Wednesday’s crucial meeting, via APF:

China under Xi has ‘real problems’, Biden says on eve of summit.

Red Dawn 2023 pic.twitter.com/I5WrBhR32i

— Carl Zha (@CarlZha) November 15, 2023

Amazingly, here’s a partial list and summary of the “no detail too small” preparations for Emperor President Xi’s arrival:

A presidential meeting at an undisclosed location. Students lining the streets waving Chinese flags. A $2,000-per-plate dinner with the most powerful business executives in America.

Every aspect of Chinese President Xi Jinping’s visit to California this week has been highly choreographed, down to what he sees outside the window during a motorcade ride and what camera angle he’s recorded from, according to people familiar with the planning. 

“There is no detail too small,” said Kurt Campbell, the White House coordinator for the Indo-Pacific.

Any meeting between two heads of state involves a degree of pomp and circumstance, but President Joe Biden’s long-awaited sit-down with Xi on Wednesday is the product of a painstaking process to accommodate China’s many requests. The behind-the-scenes effort is a sign of Beijing’s anxiety over the optics that could result from Xi’s first visit to the U.S. in six years.

Overall, China is looking for Xi’s trip to California to be seen as a “grand visit,” officials said.

Xi’s motorcade flew past unusually pristine streets lined with students and supporters waiving Chinese flags, though there are reports of some sporadic protests popping up too:

But here’s the BEFORE…

This is Gavin Newsom’s California when China’s leader isn’t in town pic.twitter.com/oPWY4CMGuU

— Michael Shellenberger (@shellenberger) November 14, 2023

Here’s the AFTER… with the Chinese national anthem ringing out…

This is XI arriving in San Francisco.

Notice, no American flags.

Don’t believe them when they say “China is our greatest threat.”

China already conquered us.pic.twitter.com/Wg4AZKaY8G

— Joey Meugniot (@realjoeymUS) November 15, 2023

The rapid and almost miraculous clean-up of San Francisco streets comes after a series of demands made by Beijing:

They insisted that the meeting be held before a broader gathering of Asia-Pacific leaders in San Francisco this week and at a location entirely separate from the Asia-Pacific Economic Cooperation summit site, two current and former U.S. officials said. China’s request was designed to elevate Xi’s stature above that of the other world leaders traveling to California this week, the officials said.

And entire roads and intersections have been closed off for Xi’s extensive security perimeter:

Time: San Francisco 23:06, Beijing time 15:06
Location: Roads around the St. Regis Hotel where President Xi stayed

Thank you to the San Francisco police for your hard work.👍pic.twitter.com/RGXDwkYuNu

— ShanghaiPanda (@thinking_panda) November 15, 2023

Given the planned Biden-Xi meeting is scheduled to run for four hours, it remains to be seen whether the US president will be able to stay alert, awake and coherent for such a lengthy high stakes session. 

Authored by Kyle Anzalone via The Libertarian Institute, 

The Israeli Defense Minister threatened to launch a war in Lebanon that would resemble the military operations in Gaza. Israeli forces have waged a brutal assault and blockade of the enclave. Tel Aviv’s bombing has killed over 11,000 Palestinian civilians, including 4,000 children. The White House is concerned that if Israel goes to war in Lebanon, it will provoke a wider conflict involving the US. 

At the start of this week, Israeli Defense Minister, Yoav Gallant, said, “What we are doing in Gaza, we can do in Beirut.” After Tel Aviv began military operations in Gaza last month, Hezbollah and the Israeli military began exchanging fire along the border. Scores of people have been killed, including soldiers and civilians on each side. An Israeli strike caused the death of a Lebanese journalist. 

Gallant threat to model operations in Lebanon after those in Gaza is concerning due to the brutality of the Israeli campaign. In addition to the documented death toll, thousands more believed dead under the rubble. Israeli forces have also laid siege to hospitals and bombed other shelters housing displaced Palestinians. 

Tel Aviv has caused a massive humanitarian catastrophe for the 2.3 million residents of the strip. Israel cut fuel, water, food, and medical aid to the enclave. Tel Aviv has refused requests from Western nations to bring aid directly from Israel into Gaza. Tel Aviv is enforcing a tedious inspection regime of all aid trucks entering Gaza through the Egyptian crossing, causing delays. 

Several Israeli officials have boasted that the operations in Gaza amount to an ethnic cleansing campaign. Agriculture Minister Avi Dichter said:

“It is first and almost an operational event. We have a huge number of fighters of our own that have to operate in a densely populated area. We need to reduce the number of residents.” He continued, “This is going to result in some sort of Nakba. [This is] a Gaza Nakba 2023, that’s how it’ll end.”

In Washington, officials are concerned that Tel Aviv will drag the US into a conflict in Lebanon. Axios reported Secretary of Defense Lloyd Austin “expressed concern” to Gallant fighting on the Israel-Lebanon border. The White House requested Austin relay the message due to “growing anxiety” that Israel’s military action is exacerbating tensions on the border.

SEE IT: CNN got an exclusive look on the ground in Gaza: ‘Everything crushed’. WATCH pic.twitter.com/SP0IWgx7ro

— Simon Ateba (@simonateba) November 14, 2023

While the Biden administration has expressed concerns about some of Tel Aviv’s actions in Gaza and Lebanon, Washington is refusing to condition any of the military support it provides to Israel on a reduction of civilian casualties or deescalation. 

On Tuesday the House passed a ‘clean’ bill that would extend government funding at current levels until Jan. 19 and Feb. 2 of next year, with no pork attached to satisfy Democrats, or spending cuts to satisfy actual conservatives. The bill is expected to sail through the Senate, and President Biden will sign (or say) whatever they put in front of him – so it’s effectively a done deal.

The bill uses a “laddered” approach with two expiration dates which fund 4 of 12 annual appropriations bills until the January date, and all of the other bills until the February date – including funding the Department of Defense and the release of economic data.

And while the House Freedom Caucus’ Matt Gaetz said “Everybody gets a mulligan,” referring to how Speaker Mike Johnson (R-LA) enlisted Democrats to move the bill forward, Goldman thinks the risk of shutdown increases in January, as reaching either a short, or a long-term extension will likely encounter fierce political resistance (full note available to pro subs in the usual place).

If Congress fails to pass any further spending bills by the expiration dates, a partial shutdown will ensue on Jan. 20, and a full shutdown will occur on Feb. 3.

One of the key points of contention is the gap in proposed spending levels between House Republicans and the Senate, estimated at around $120 billion. This disagreement makes the passage of full-year spending bills an uphill battle. Adding fuel to the fire is the condition attached by Republicans for their support of aid to Ukraine, which hinges on immigration reforms. Furthermore, the establishment of a “debt commission” is on the table, potentially forming part of a larger fiscal package.

As Punchbowl News further notes;

When the initial Jan. 19 funding deadline comes along — just 21 legislative days away under the current House calendar — Johnson will likely be in largely the same position he’s in now.

He’ll have a House Republican Conference that disagrees with his tactics and is unwilling to set aside its own short-term politics to seek a long-term funding deal. Just 57% of House Republicans voted for the CR Tuesday, hardly a mark of confidence in the new speaker.

House Republicans will only have a narrow four-seat majority by that point. And Johnson will still have a conference that is seeking steep spending cuts while the Senate is proceeding with bipartisan funding bills.

Johnson’s members have so far failed to pass some major spending bills, including the Labor-HHS, Commerce-Justice-Science and Transportation-HUD packages. The Senate will still be far more united than the fractured House.

Johnson couldn’t even pass a rule — a typically party-line procedural motion — for the CR this week. When it comes to actually winning a spending showdown with President Joe Biden and Democrats, Johnson and House Republicans are nowhere.

In short, the path forward contains lots of political landmines. While this temporary measure has managed to avoid an immediate crisis, it sets the stage for a more intense showdown early next year. The likelihood of further extensions faces stiff resistance, particularly from House Republicans. The situation is a ticking time bomb, with each extension only amplifying the eventual fallout.

Authored by Simon White, Bloomberg macro strategist,

Short covering on Tuesday drove a powerful rally in Treasuries, but deteriorating liquidity conditions means they face greater downside than upside risk.

The outsized move in bond yields in the US and the rest of the world from a slightly softer-than-expected October inflation print was an unmissable sign of a market that got caught short.

Today’s retail sales number was better than expected (though a decline in headline), potentially wrong-footing the bond market after yesterday’s strong gains.

Leading data continue to be increasingly supportive for retail sales.

As is typically the case when positioning is the primary cause of a market move, the narratives play catch up, with only a 0.1% miss in core CPI largely being used to justify that the Federal Reserve is definitely done hiking, and that they will have to make an extra 25 bps of rate cuts next year. Go figure.

Nonetheless, positioning in bonds is likely now cleaner and more neutral. But that does not alter the deteriorating liquidity conditions in the Treasury and other G7 bond markets. Greater volatility, supply concerns, regulations, etc. are all cited as reasons for declining bond liquidity, but the primary cause in recent years is inflation.

It is the greatest current source of uncertainty. And contrary to the market’s view, there are compelling signs it will re-accelerate next year. Inflation volatility is already rising (blue line in chart below), and it will remain high if and when inflation reheats. As the chart shows, this means bond liquidity will continue to worsen.

Bonds, as their upside potential is limited, typically exhibit negative skew, i.e. they are exposed to greater moves to the downside than the upside. Combined with poor liquidity conditions and receding recession risk, it means investors will be more wary of downside rather than upside risk – starting with the possibility of stronger retail-sales data later today.

Shares of Target jumped in premarket trading in New York after it reported adjusted earnings per share for the third quarter that beat Wall Street expectations. There were fewer markdowns and more efficiencies in inventory management following the big-box retailer’s inventory buildups earlier this year. 

Earnings per share for the quarter (ending Oct. 28) came in at $2.10 per share, beating Wall Street’s estimate of $1.47. This was due primarily to a 14% reduction in inventory from a year ago. The company largely attributed the beat to “disciplined inventory and expense management.”

However, comparable sales fell 4.9% for the second consecutive quarter as consumer spending on discretionary items weakened. That was the second-largest drop since 2009.

Here’s a snapshot of the third quarter results: 

• Adjusted EPS $2.10 vs. $1.54 y/y, estimate $1.47 (Bloomberg Consensus)

• Comparable sales -4.9% vs. +2.7% y/y, estimate -5.22%

• Comp digital sales -6% vs. +0.3% y/y, estimate -10.3%

• Sales $25.00 billion, -4.3% y/y, estimate $24.88 billion

• Gross margin 27.4% vs. 24.7% y/y, estimate 26.3%

• Ebit $1.34 billion, +30% y/y

•  Ebitda $2.06 billion, estimate $1.67 billion

• Customer transactions -4.1% vs. +1.4% y/y

• Average transaction amount -0.8% vs. +1.3% y/y, estimate -1.37%

• Digital sales as share of total sales 16.8% vs. 17.1% y/y

• Total stores 1,956, +0.8% y/y, estimate 1,965

• Operating margin 5.2%, estimate 3.94%

• SG&A expense $5.32 billion, +1.9% y/y, estimate $5.35 billion

• Store comparable sales -4.6% vs. +3.2% y/y, estimate -4.91%

• Stores originated sales 83.2% vs. 82.9% y/y, estimate 83.4%

• Operating income $1.32 billion, +29% y/y, estimate $1 billion

For the fourth quarter, Target has adjusted EPS in a broad range, between $1.90 to $2.60, which the Bloomberg Consensus among Wall Street professionals is around $2.23. 

• Sees adjusted EPS $1.90 to $2.60, estimate $2.23

Following the earnings report, Kate McShane, a retail analyst with Goldman Sachs, told clients:

“We expect the stock to track higher given the 3Q beat, noting the strong margin performance likely reinforces the longer term operating margin recovery opportunity to 6%+. On the call, we are interested in the cadence of SSS throughout 3Q; QTD trends by category; the relative impact of the gross margin drivers, including markdowns, mix, and shrink; the view of inflation; and the company’s promotional.” 

McShane noted:

 “We are Buy rated on TGT with a 12-month price target of $168, based on our risk-reward framework with downside/base/upside relative P/E multiples of 80%/90%/100%.”

However, she outlined several TGT downside risks:

1. Traffic and sales trends decelerate due to weakness in consumer spending;

2. Inflationary pressures related to product costs, freight/transportation, and/or wages;

3. The competitive environment forces TGT to compete more aggressively on price; 

4. Margins come under pressure from omni-channel, supply chain investments, and mix shift.

More from the note: 

Target shares have plunged more than 25% year-to-date. The company first warned about a consumer slowdown in May. Then, it was battered by a consumer boycott over selling ‘woke’ clothing to children. Shares in the premarket jumped as much as 15%. 

Target earnings come as several large retailers, like Walmart, Macy’s, and Gap, are expected to report earnings on Thursday. Also, comments from management teams will help investors gauge the strength of the consumer ahead of the holiday shopping season.