Wednesday, December 18, 2013

Target Corporation (TGT) Analysis: One Year Later

I have previously analyzed Target Corporation (TGT) in a video: Stock and Company analysis Target Corporation (TGT) In this video I explain why I liked this company as a long term buy and hold company. In this blog today I will review this last year of 2013 and look to 2014. 

Target's 2013 performance

It has under performed the market year to date. Today is December 17th, 2013 and during this last year the (SPY) which tracks the SP500 index is up around 24% where TGT is up under 1%. My initial purchase in the project portfolio and personal account was at $58.04 on January 2nd, 2012. I sold on March 4th at $65.85. Target has had a 52 week range of $58.01 to $73.50. I was extremely lucky to buy on the day it hit its low I never try to time tops or bottoms but sometimes you can get lucky I missed the top as you can see. I also collected one dividend during this time. Some might ask why did you sell if your view is long term? I usually don't sell just to profit unless it is a large increase in a short amount of time. In this case I felt I could buy it cheaper at a later date with a lower price even with the dividends counted in. This all depends on your tax situation if you are in a IRA taking a profit today does not matter but if you have an individual account profits would be taxed at the capital gains rate. 

Why has Target underperformed and come down from its high? 

The third quarter was very tough quarter for the company. The same store growth miss expectation from .9% growth from expectations of 1.2%. Earnings will still be in the range of $4.59 to $4.70 a share. The expectations for the future were cut. The stock market is forward looking so things that are predicted to happen matter in the minds of investors. This creates opportunities because people are wrong all the time. 

The major problem now was actually suppose to be a catalyst for the company! The opportunity to grow because of the Canadian expansion. The third quarter results were dragged down .29 per share because of the Canadian division. It is estimated to be down another between .22 and .30 per share for the forth quarter. This is very troubling for something last year many investors including myself thought would be growth for the company. An estimate of .80 per share a year growth or .20 a quarter. 

Positives about Target

Target raised its dividend by 19% from $1.44 a year to $1.72 which management has promised they would do and a payout ratio is around 41%.

The bad news is priced in to the stock. If earnings rise in Canada there is a chance for huge gains. Target does have a good history of operational success. 

Target Corp (TGT) yield is 2.79% this beats competitors Wal-Mart Stores Inc. (WMT) with a 2.44% yield, Costco Wholesale Corporation (COST) with a 1.06% yield and Family Dollar Stores (FDO) with a 1.64% yield.


Expansion and growth is not always easy for any company and there will be setbacks that have to be overcome. Costco is looking at expanding to Europe they may have a hard time also that is yet to be seen but be careful not to over value or pay a premium for growth because everything has to go right or the stock will reflect the bad news. 

Buying today on December 17th 2013 does not mean it couldn't go down more leave yourself enough cash to add to your position if you choose to invest in this company or any company. I am long as of today at $61.55 and think the company is trading at a value if they can improve there international operations.

I will make another video and attach it to this blog entry. Let me know your thoughts on this sector or company. 

Disclaimer: This is a personal weblog. The opinions expressed here are my own. All data and information provided on this site is for informational purposes only. Please do your own research before investing.

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