Is Target Corporation (NYSE:TGT) Ready For A Rally?
Target Corporation (NYSE:TGT) recently announced a hike in hourly earnings for its employees, which is likely to attract more quality employees to its stores. The company has also consistently paid a dividend to shareholders since its inception in 1967, which makes it an excellent dividend stock.
The company is makings several strategic moves that could see its stock price rally to new highs in the medium to long-term. For example, the company recently announced that it is opening several small-format stores in densely populated areas in order to serve its customers better.
The company faces stiff competition from companies such as Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores Inc (NYSE:WMT). Amazon has especially impacted Target negatively as the company’s stock declined significantly five years ago after Amazon entered the e-commerce sector.
However, Target has since recovered from Amazon’s impact as the retailer also launched its digital store which is doing quite well. Target’s e-commerce sales grew by 37% in the last quarter with significant potential for future growth given that the division started from scratch just 18 months ago.
The retailer’s current strategy involves multi-pronged approach aimed at capitalizing on the trust it has built with its current customers to boost its overall revenues. The company is currently revamping its old stores, opening new small format stores and focusing on e-commerce with the main goal of increasing its top line.
Target has been growing its dividend payout over the past five years despite the fact that its revenues have largely been flat during this period. This is an indicator that the retailer has significant free cash flow levels, which has allowed it to grow its dividend per share by 16.7% over the same period.
However, other analysts opine that Target has generated a negative return on investment over the past ten years as it has largely underperformed the S&P 500 over the same duration. This group of analysts and investors believe that investing in Target at this point is a risky affair given the various headwinds facing the retail sector.
Therefore, most investors are split into two camps with one group rooting for Target, while the other predicts its eventual downfall. The question remains whether Target is a good investment at its current price and valuation given the prevailing conditions in the retail industry.
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