Sunday, April 2, 2017

Wealth: Stock Alert - TGT


Target Corporation is a general merchandise store that distinguishes itself apart from others by offering great deals without sacrificing service or options. While Walmart can be seen as the corner store for deals and therefore a staple for many American homes, Target seems to aim for a more middle class clientele. Their brands are recognizable, their selection isn't lacking, and their service always seems to be a cut above other general merchandise stores. They offer clothing, groceries, and much more.

Their merchandise comes from a network of forty distribution centers and are then carrier through multiple channels to their intended Target locations that are primarily located across the United States. They also offer digital services through their Target website with added perks for Target RED card customers. The company's risk factors seem to revolve around the same risk factors that can affect all general merchandise stores. Most notably is whether or not they will be able to maintain a good reputation. While this would seem simple for some stores, Target itself can be an easy target as they already walk a tight line as they have been called the store that is "Not Walmart". In addition, if Target cannot stay ahead of the trends, they themselves will be given the boot in lieu of another general merchandise store that can stock items faster or offer more competitive prices. Lastly, items like the data breach that occurred some time ago can adversely affect business as they know it.

Lately, the price of Target stock has been on the decline. This comes as the reaction to decreased earnings. Fears of Target's ability to combat online retailers and the ever present Walmart are forever looming over their shoulders. While Target has beefed up its online purchases to a little over 4.4% where only two years prior it was hovering around 2.6%, they still have much to be desired in the event of a smooth technological transition. This leaves obvious profits on the table.

But alas, Target has been working hard to stay with the times. Whether investors noticed or not, Target has been shifting its stores like many others to smaller venues. In 2016, Target had only nine stores that were of 49,999 or less square feet. In 2017 however, they have more than doubled that amount. Now, they have about twenty two stores of that size category while they have lost three stores of higher square footage. This would appear to be a smart move as more space means more in store stock while they should instead be focusing on a transition to an online (and therefore more efficient) market.

All of this said, the numbers look pretty good for Target (TGT). Their current share price is fair, their EPS is strong, and their dividend has been raising for the forty nine years. This is why I have chosen to keep Target in my portfolio and also why I intend to continue loading more funds into their company.

Target Corporation (TGT)
Price: $55.19/share
EPS: 4.60
Annual dividend: $2.40 /4.35%
Payout ratio: 52%

**Note: Q1 earnings announcement on May 17th, 2017
Historically: Q1, Q2 have been decent with drops in Q3 before higher earnings in Q4

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