Fundamental Analysis: TARGET (#TGT)

Target Corporation is an American retail corporation. The eighth-largest retailer in the United States, it is a component of the S&P 500 Index. Its largest competitors, Walmart and Amazon.com, are the first and second largest retailers, respectively.


J. P. Morgan analysts give a Buy recommendation for #TGT and set a target price of $ 210.


⚡️Growth factors

  • Target #TGT has recently been under pressure from its high-cap competitors Walmart #WMT, Costco #COST, The Home Depot #HD, and Lowe's #LOW, but has still benefited from the COVID-19 pandemic. The company was able to increase its market share and assortment in stores through partnerships with other brands.

  • The closure of stores and the bankruptcy of some malls amid the pandemic had a positive impact on the company as it pushed more brands to open their zones inside Target department stores. Apple was the last company to open its own point of sale there after ULTA, Levi's and Disney. The event reinforced analysts' belief that more brands will partner in the future.

  • Analysts also note that historically, about 27% of the range of apparel and beauty and health products were sold in department stores. Now, up to 60% of non-branded remanufactured goods allow Target to take advantage of the rise in consumption since the pandemic. J. P. Morgan

  • Economists forecast 10% growth in personal consumption spending in 2021

  • Growth in consumer spending amid recovery in economic activity will become the main growth driver for the company, in our opinion, already in the medium term. It is also worth noting that Target recently reported better than expected. The paper is in our list of ideas, we will follow the dynamics.


📖 Financial indicators:

  • Growing Profit Margin: TGT's current net profit margins (4.7%) are higher than last year (4.2%)

  • Earnings vs Industry: TGT earnings growth over the past year (33.6%) underperformed the Multiline Retail industry 62.3%

  • Short Term Liabilities: TGT's short term assets ($20.8B) exceed its short term liabilities ($20.1B)

  • Long Term Liabilities: TGT's short term assets ($20.8B) exceed its long term liabilities ($16.7B)

  • Debt Level: TGT's debt to equity ratio (75%) is considered high

  • Reducing Debt: TGT's debt to equity ratio has reduced from 98.9% to 75% over the past 5 years

  • Debt Coverage: TGT's debt is well covered by operating cash flow (97.2%)

  • High Dividend: TGT's dividend (1.5%) is low compared to the top 25% of dividend payers in the US market (3.46%)


✅ Target # TGT is an American company that operates a chain of retail stores

🎯 Target price - $ 210, growth potential + 15%

OTB Global Investments

London, 16 March 2021


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