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Is Target Poised to Grow?

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Oct. 23 2017, Updated 9:09 a.m. ET

E-commerce to drive growth

As discussed in the earlier part of this series, Target (TGT) isn’t shying away from making upfront investments to accelerate its sales growth. The company is fortifying its digital business and is rolling out customer-friendly services that are driving its digital business and supporting its comps growth.

The company extended its partnership with Google (GOOGL) to offer voice-based shopping services and expanded its offerings nationwide through Google Express. Moreover, the company acquired Grand Junction to speed up its delivery process and to offer same-day delivery. Also, the company lowered prices on several items to attract buyers amid increasing competition from Amazon (AMZN), Costco (COST), and Walmart (WMT).

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In addition, the company expanded its fast-growing exclusive brand offerings and remains on track to add 12 new brands this year. Meanwhile, Target collaborated with Magnolia, a leading home and lifestyle brand, to launch Hearth & Hand, which will be exclusively available on Target.com and Target stores starting November 5, 2017. All these measures position the company well to accelerate sales growth and reinstate investor confidence in the stock.

YTD stock performance

As of October 19, 2017, Target stock is down about 16% on a YTD (year-to-date) basis. Tepid sales and increasing competition led investors to dump Target stock. However, the company’s stock prices have improved in the past couple of months thanks to the enhanced second-quarter comps growth driven by continued business investments.

Going forward, rising competitive activity and pressure on margins stemming from higher investments might keep investors at bay. However, Target’s renewed performance is undoubtedly a big positive.

On a YTD basis, Walmart stock has risen 25% driven by its growth initiatives and better prospects. Meanwhile, the S&P 500 (SPX) is up 14.4%.

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