Will Target Corporation (NYSE:TGT) Ever Recover From Its Recent Dip?

Target Corporation (NYSE:TGT) stock recently plunged from a high of $58.02 on November 21st to a low of $55.88 at the close of business on November 24th. This is not the first dip in the stock this month as the retailer has been under intense selling pressure since releasing its third quarter results on November 15th.

Article Summary

Target Corporation recorded a significant dip in its stock price last week.

The retailer has been on a downtrend since November 15th.

Target’s future does not look promising given the stiff competition in the retail industry.

Here’s the trading report on TGT.

The big box retailer’s third quarter results were quite positive as the overall revenues and earnings per share beat analysts’ estimates. However, it was the retailer’s weak fourth quarter guidance that led to the massive sell-off in the company’s stock price.

A closer look at the headwinds facing the company indicates that the retailer is facing stiff competition from both Amazon.com, Inc. (NASDAQ:AMZN) and Wal-Mart Stores Inc (NYSE:WMT). The two retailers are doing much better than Target on all fronts including the e-commerce segment as well as the physical retail segment.

Target is the only physical retailer opening new stores, but its declining profits do not show evidence that this is a profitable strategy. The company’s CEO Brian Cornell expressed confidence in the retailer’s current growth strategy, which involves adding new brands to its offerings as well as increasing the wages of its employees to boost customer service.

The market’s reaction to Target’s revised forward guidance, which was in line with analysts’ expectations of a $1.24 EPS, was quite negative given  that the company predicted comparable sales growth of 2% in the fourth quarter. This was extremely disappointing to the market given that the fourth quarter is the busiest season for the retail industry, yet the forward guidance was much lower than that of the previous year.

The retailer finds itself stuck between two giants, Amazon and Wal-Mart, who currently control a large percentage of the retail market and are engaged in fierce competition for customers. The battle for retail supremacy is shaping up to be between the two major retailers who control significant portions of the e-commerce and physical retail industries.

Smaller retailers such as Target will have no option but to scramble for the remains left-over by the two retail giants. The fierce competition between Amazon and Wal-Mart is what spells doom for Target’s future as it has to do a lot more in order to compete effectively with the two giants.

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