Recent Buy – Target (TGT)

GA

Summary:

Target (TGT) is a general store, grocery, and in-store amenities, including Target Café, Target Photo, Target Optical, Portrait Studio, Starbucks, and other food service offerings. Target Corporation sells products through its stores; and digital channels, including Target.com. As of January 30, 2016, the company operated 1,792 stores in the United States. Target Corporation was founded in 1902 and is headquartered in Minneapolis, Minnesota.

Why Buy?

  • Recent pull back 12% a couple days ago. And its share price has decreased 32% from its 52-week high of $84.14
  • There is still reasons for brick and mortar to exist, and Target will be one of them.
  • I was in Target the other day buying Pre-natal vitamin (you don’t have to be pregnant to take prenatal vitamin, at 35 yo, my risk of getting a child with problem is higher, so to boost up my folic acid 2 months prior to trying is recommended). Back to the store, the line is okay, mainly they probably have more cashier than Walmart. Customer service is okay. The isles are clean and organised. I figured, their sales mustn’t been that bad.
  • Amazon is no big deal – it’s the company that doesn’t make any profit, drone delivery will never be on my yard. Wasn’t that some dude shooting down drone flying on his yard before? Crazy stuff that probably wouldn’t be practical at the moment with our infrastructure, maybe “cool” in theory but not executable in real life.  People will eventually realized, Amazon membership is not worth it, as I could buy the same stuff at eBay and still get free shipping. LOL 🙂
  • Yield is good – 4.15% in dividend. Payout is <50%. Target earns $1.45/share last quarter. They are still making money.
  • P/E: 10 vs 22 for S&P 500 vs 173 Amazon … you tell me what’s more reasonable.
  • Target will eventually shore up its online system to match with Amazon, or make appropriate acquisition.

Threat:

  • CEO gotta go – After the earning the CEO reacted the same way as Sear’s chairman back in the day. More share buyback, increase dividend. Didn’t see it coming, and it hit Sears like a brick. Billions has drained down the tube and no one shop at Sears. Sears outlet has a fridge with a hole in it, and they tried to sell for $700. Crazy??!! Out of touch! Try Walmart CEO – made a mistake of underestimate Amazon. Admitted it. Corrected buy invested in digital. Buy jet.com to compete. I even buy some heating element for my washer on walmart.com
  • Competition – Everybody is lower their prices to compete market share
  • NAFTA – If Nafta goes away, both Walmart and Target who imports a lot of stuff from Mexico might face price scrutiny.
  • Security – It seems like Target hasn’t earned its trust back from the public for the previous security breach. People has jumped to Amazon instead.
  • Market all all time high – yup, when it crashes, even TGT is 32% down from last year, it’s will go down with the rest of the market
  • Dividend stock growth faster than Main Street. In the past 2 years, the GDP might have grown < 2%, and dividend stock grew 9%, it’s a huge concern that slow down might be coming soon. (Those growth was based on share buyback, and Target bought $5B)
  • Warren Buffet exited out of Walmart. It’s a sign that he doesn’t have confident in brick and mortar.

What Type of Change Do I want to See at Target in order to stop the decrease in profit or create more confident in investors?

1. Acquisition to boost online sale

2. Membership base need to increase to free shipping. Buy an App the stream video or other incentives for membership to be worthwhile. They already have 5% discount for using Target red card.

3. Target shoppers are classy, so improve the big ticket items for DYI project. More like Lowes and Home Depot.

4. Shore up the price-match guarantee program. People will go to Target or Best Buy to look at stuff, touch it, feel it, then go  online for better price. Match it. Make it so that people can’t walk out of the store without the Target items and more while they are at it.

5. Shore up the hardware department. Make it truly one-stop shop. Instead making small elite store, keep the same or make it bigger.

6. Get the community involve by having local produce. Local manufacturing product to promote image that dampened by the bathroom issues with the conservative. Make target a store for everybody again.

Chasing the Bottom

A flocks of Dividend investors believe in Target and potential for rebound in long-term. Here are some of the articles that I’ve found. Keep in mind that these financial are very successful at what they do. I followed many of these blogs and watched their dividend growth from $0 all the way up to 4 digit dividend. That’s a lot! I’ve decided to join the gangs to chase the bottom myself. LOL:) Here goes:

More Dividend bought some 1/16/17 @ $63.76

Dividend Diplomat bought several times Averaging @ $70.91

Investment hunting 2/28/17 @ $58.75

My dividend Pipeline 1/18/17 @67.28

Dividend Daze 1/18/17 @67.40

Dividend Hawk 1/18/17 @ 67.10

I Want to Retire Soon: Recent Buy (TGT) – June 14, 2016 @ 66.05

Recent Buy (TGT) – Predictable Snowball @67.40

I bought 10 share of TGT @ $57.xx.

Base on these numbers, Target will continue to tank, maybe below $50 before it will bounce back up. I’ll make a second purchase if that is the case. If not, I’ll just hang tight and and receive my 4.15% dividend yield per year, and forget about the stock price. LOL 🙂

What do you think about my buy? And are you going to jump on the band wagon or stay out of the blood shed? What do you think of TGT stock price will do in the near term? Is it the end of brick and mortar?

 

 

GA

14 Comments

  1. I’m a big fan of TGT. While technology is shifting away from the traditional brick and mortar stores there is still value in it. TGT is one of the big players left and I expect them to stay around for a while. Looking at the numbers you mentioned from a dividend investor’s point of view, the dividend is in a safe spot and we know the market volatility will keep changing the price. At least for now, I’m going to do the same and sit on the nice 4% dividend but key an eye on the safety. Great buy! And thank you for the inclusion in the post.

    • Like you, I’m betting TGT will stick around for a long time. LOL 🙂 I’m not much of a shopper, when I do, I do like to touch and feel the product that I’m buying, and I also want to make 1 trip stop, so I don’t waste my time shopping around. Or sometimes I want something “now” instead of waiting for a couple of days to ship to me.

  2. You definitely picked up some great current yield with this recent buy after the free fall in price. You are in good company as you have noted above all the recent purchases among our peers. I’m out of TGT. Never owned it nor do I plan to. Buying at these lows do give you a better margin of safety though going forward. Thanks for sharing.

    • Yeah, I’m planning on averaging down actually, but just in case the company announce more buyback, the stock will turn-around, and I think this is a good entry point. In the long haul it should be okay.

  3. I am toying with the idea of entering TGT and going back to WMT, they are going out at good prices after all. Then I see that all retail stocks are having a lot of troubles, some of them have huge cash reserves and might be able to weather the storm, others simply disappear. Too erratic sometimes, I would need to sell some “more volatile” stocks that I already own to give space to these ones. I think that until dividend holds price of TGT will not fall much further (and to me this is a reason to BUY), but they need to act quickly to regain market share because the money in their coffers will not last forever. I remain on the watch with them…
    Ciao ciao
    Stal

    • I think waiting for TGT to go below $50 is much safer entry points. Some report is predicting earning is $3.50-4.05/year. PE of 10 would only make stock price at $35-40.5.

  4. Thank you for mentioning my article! I hope all has been going well for you. I think you made a good purchase here at this price. Hopefully in the future I will be able to average down some more but currently I am weighted kind of heavy in the retail sector. Very nice article. Thanks for sharing!

    • The fed might raise interest rate. The market might go down, and TGT being consumer defense might go up. We never know, it seems like the enthusiasm is super high nowadays base on speculation but no real substantial earning hike. It is truly worrisome.

  5. I think I’d pick up some Target just in case retail makes a comeback if it drops below 50. I think their earnings will be pressured in the next few years due to the investments they’re making and we could see EPS in the $4 range or below easily.

    • $4 EPS is what a lot of analysts are now recommending selling. So, as predicted, TGT is now at $56. I’d wait for it to fall to the $50 before buying more shares.

  6. I love the analysis that you’ve done. I will definitely need to look closer at TGT as it looks like it’s probably a great buy. Plus based on your round up it is a favorite in the dividend community. Thanks for sharing!!!

  7. Thanks for the mention. Heck, I bought TGT before the large decrease and I’m considering adding to it again. I appreciate you taking the time to aggregate the facts here and make my analysis of the company that much easier.

    Great buy!

    Bert

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