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Target Corp TGT

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

Strong Fourth Quarter, Soft Margin Outlook Do Not Much Alter Our View of Target; Shares Rich

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

We plan to increase our $127 fair value estimate for no-moat Target by a mid-single-digit percentage after the company posted strong fourth-quarter earnings. While management’s outlook for fiscal 2021 operating margin is softer than our prior view, our long-term expectations remain (low-single-digit percentage sales growth, 6%-7% adjusted operating margins). Although Target has admirably adapted to sharp pandemic-era e-commerce growth, we suggest long-term investors await a more attractive entry point, considering long-term competition in a retail environment without meaningful customer switching costs.

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Company Profile

Business Description

With 1,897 stores (as of the end of fiscal 2020), Target is a leading American general merchandise retailer, offering a variety of products across several categories, including beauty and household essentials (26% of fiscal 2020 sales), food and beverage (20%), home furnishings and décor (20%), hardlines (18%), and apparel and accessories (16%). Most of Target’s stores are large, averaging nearly 130,000 square feet. The company has a significant e-commerce presence, deriving around 18% of sales from the channel (up from about 9% in fiscal 2019, before the pandemic). In addition to its namesake stores, Target owns Shipt, an online same-day delivery platform. After it exited Canada in 2015, virtually all of Target’s revenue is generated from the United States.

Contact
1000 Nicollet Mall
Minneapolis, MN, 55403
T +1 612 304-6073
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Jan 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Aggressive Growth
Employees 409,000

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