Target: Time To Jump In

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Kumquat Research


  • Target is spending billions to re-invent its brand and the way it operates.
  • While competitors are investing in big acquisitions, Target is investing in itself.
  • I think TGT presents upside value over the long-term due to these new initiatives.

While primary competitors Wal-Mart (WMT) and Amazon (AMZN) have invested in big acquisitions of companies like and Whole Foods (WFM) respectively, Target (NYSE:TGT) is going another route: investing in itself. The company announced a few months ago that it would be committing $7 billion over the next 3 years towards remodeling its stores, launching new labels, and attempting to increase traffic and improve comparable store sales. I think TGT is now a buy as this initiative looks promising and could re-vitalize Target's operating results.

Target's stock price has struggled over the past 12 months, and no, it has nothing to do with bathrooms. Fierce competition from brick-and-mortar Wal-Mart and online retailer Amazon has hurt revenue and comps and has led to a decrease in profits:

ChartTGT Net Income (TTM) data by YCharts

With TGT down 25% over since June 2016 and trading just above multi-year lows, I think now might be the time to buy.

Target's new plan includes, over the next three years, remodeling 600 existing stores, rolling out 100 additional small-format stores, lowering prices across the board, investing in the supply chain to speed up sales through online and delivery, launching 12 new, exclusive brands, and investing in digital properties. Every one of these propositions is aimed at combating Wal-Mart and Amazon and the declining sales they have caused at Target, and so far I'm encouraged by the ideas and progress I've seen. Here are some of what I think to be the salient points, and I'll start out with the good.

First, accelerating the small-format stores is a smart move for three reasons: 1) it will allow Target to penetrate more markets and reach more people without finding the real estate for a sprawling superstore 2) it will create more distribution centers for delivering online orders to nearby customers and

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To follow me click the "Follow" button! (Easy right?)Articles written and comments posted by Kumquat Research are NOT financial or investment advice, and only express his opinion. Do your own due diligence!

Disclosure: I am/we are long AMZN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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