By Jordan Faigen
Target Corporation (NYSE:TGT) can’t seem to catch a break. First the data breach, then a fired CEO, and now a disappointing earnings report. Are these trials foreshadowing the potential for more gloom?
Target in the News
Crossroads Capital up 55.8% YTD after 32.5% in 2019 explains how it did it
Crossroads Capital is up 55.8% net for this year through the end of October. The fund released its 2019 annual letter this month after scrapping its previous 2019 letter in March due to the changes brought about by the pandemic. For 2019, the fund was up 32.5% net. Since inception in June 2016, Crossroads Capital Read More
This week, Target Corporation (NYSE:TGT) announced that they fired the president of is Canadian operations, Tony Fisher. In 2012, Target opened 100 stores in Canada, however, since the launch of those stores, the Canadian division has lost $1 billion. Target is hoping that with the change in management, a fast and positive transition will follow.
On top of this abrupt role change, Target Corporation (NYSE:TGT) just revealed a loss of .3% in same-store sales. Overall sales increased just over 2%, but the company’s net income fell 34.3% to $1.97 billion and revenue slipped 1% to $72.6 billion. Interim CEO John Mulligan said sales and traffic trends, “improved substantially,” after the data breach scandal, but these numbers are not all that reassuring. Mulligan added, “while we are pleased with this momentum, we need to move more quickly.”
What Does This Mean for Target’s Stock
Sterne Agee analyst Charles Grom recommended HOLD Target following the latest earnings report saying, “the 2.3% decline in traffic the big box retailer reported was a big negative in the report.” Grom noted that, “the 128 basis point decline in U.S. gross profit margins was a big concern, as was the 50 basis point decline in REDcard penetration quarter over quarter.” In addition, the poor Canadian sales were even weaker than the Sterne Agee team had expected. Grom has a .07% average return per recommendation and a 48% success rate recommending stocks.
Investor Place contributor, Dan Burrows, also recognizes the unfortunate struggles of Target Corporation (NYSE:TGT), but thinks that now is the time to BUY Target. However, Burrows did say that, “Target can’t seem to do anything right.” After Target missed Street projections, Burrows pointed out, “TGT, of course, was already severely wounded from last year’s data fiasco, in which hackers broke in and stole information connected to tens of millions of credit and debit cards. Additionally, TGT’s aggressive expansion into Canada has been bleeding red ink. Call it a triple-whammy.” However, Burrows argued, “For anyone interested in Target stock, this could be just the entry point they’re looking for. As hard as it is to pull the trigger when a company is awash in bad news, that’s usually the time to buy low.” He added, “Target stock wants to come back. Target stock has put together four decent runs this year, only to give back the gains. At just 12 times forward earnings, Target stock is too cheap and tempting for value investors to ignore.” It might take a while for Target to clean up its mess, but “TGT is still the nation’s third-largest retailer.” And, “there’s blood in the streets, which means now is the time to buy Target stock.” Burrows has a +2.5% average return per recommendation and a 62% success rate of recommendations.
Target Corporation (NYSE:TGT) has clearly experienced some major struggles over the past two years. And while their troubles might be coming to a head, might this be the perfect time to BUY?
Jordan Faigen covers financial markets and the latest stock market news. She can be reached at [email protected]