What’s Driving Target’s Impressive Stock Performance in 2019?



Growth drivers

Shares of Target Corporation (TGT) have generated better returns than both Costco (COST) and Walmart (WMT) so far this year. Target stock is up 25.1% on a YTD (year-to-date) basis. In comparison, the stocks of Costco and Walmart have risen 20.5% and 10.7%, respectively. The S&P 500 has risen 15.7% in the same period.

The stock prices of these large retailers are benefiting from strong growth in comparable sales despite a heightened competitive environment. Target, Walmart, and Costco have successfully managed to drive traffic and, in turn, sales despite Amazon’s expansion into the grocery business. Continued investments in price, expanded assortments, and the expansion of digital fulfillment options have helped these retailers to defend and grow their market shares.

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Target’s strong sales performance during the past year and its phenomenal EPS growth have supported the uptrend in its stock. Meanwhile, Target is expected to continue to report improved comparable sales in the coming quarters, and it’s trading at a lower valuation multiple than Walmart and Costco. Moreover, Target offers a better dividend yield.

Valuation summary and dividend yield

Target stock is trading at a forward PE multiple of 14.2x, significantly below Costco’s and Walmart’s forward PE multiples of 30.3x and 21.7x, respectively. Target stock currently has a dividend yield of 3.1%, which is higher than Walmart’s and Costco’s current dividend yields of 2.1% and 1%, respectively.


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