Will Target’s Business Investments Boost Its Stock in 2018?



Target stock showing recovery

So far this fiscal year, Target (TGT) has managed to scale up its digital business, which is evident in its improved sales and a steep recovery in its stock price from record lows. Target’s top line benefitted from its digital initiatives, which included fast-delivery options on online orders and expanded offerings. Plus, lower pricing of several essential items and the success of its new and exclusive brands further supported its top-line growth. Analysts project the company’s top line to finish the year on a positive note.

However, challenges persist as Target lags Walmart (WMT) and Amazon (AMZN) in digital capabilities. Meanwhile, Costco (COST) continues to drive its top line through value pricing and enhanced offerings. Costco has also expanded its same-day delivery of groceries through Instacart and is offering free two-day delivery of about 500 non-perishable products in partnership with United Parcel Service (UPS) for orders above $75.

Also, Target’s profitability is projected to decline owing to the pressure on margins from increased investments in growth opportunities. Moreover, Target stock is trading at a premium when compared with the analysts’ 12-month price target. Continue to the later part of this series to read more on analyst recommendations for Target stock.

YTD stock performance

Target stock has fallen 8.9% on a YTD (year-to-date) basis as of December 26, 2017, and has underperformed the S&P 500 (SPX) and its peers in terms of stock price gains. Costco and Walmart stock have gained 21.2% and 43.5% during the same period, respectively. Meanwhile, the S&P 500 Index is up by 19.7% on a YTD basis.

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