Target Corp (TGT-N)

Added about 1.5 years ago based on quality name that had been priced at a discount (post Covid-19 sell off). Since then, has sold shares. Believes share price is fully valued. Would invest more if share price fell. 

Delivered an amazing quarter last week after a brutal 2 years (-62%) suffering problems like too much inventory post-Covid and theft. The new CEO led the company on a rally from last October through April, but the company issued an an earnings miss in May and issued weak guidance for the next quarter. Shares plunged from a skeptical street. But shares jumped 10% last week after reporting. Target is back! They delivered 2% same-store sales growth, a beat, and the first quarter of positive comps since end-2022, even with lower comps. Also, digital sales are up and higher general traffic. They beat earnings and operating margins though lowered slightly their earnings forecast. Reasons for success: controlling theft, launching a successful loyalty program and cutting prices on 5,000 items.

The US consumer remains a risk despite Target's strong performance today and their quarter. Target's number is encouraging though. He will look at them.

They did a good job getting back to basics in their general merchandise, but consumables will be the real driver. He expectations for comps are low this quarter. She's interested in what they guide when they report next week, hoping for a nice 2-2.25% increase. There's a lot of room here for margin improvement. 

He exited around $170 as it got exuberant in the spring on improving margins. The thesis has played out. Still positive on it, but doesn't yet meet his portfolio requirement of a +20% return to the target price. 

Consumer is looking for savings, so he's neutral to fairly positive on the name at these levels.

Has continued to hold. Margins have continued to improve. Supply chain issues are beginning to resolve themselves. Consumer spending patterns continue support business model. ~4% dividend yield is strong and safe. Would expect share price to increase to ~$200. Excellent for long term investors. 

Retail advantage: $1 billion house brands, now totalling 11. Also, they have such scale, they can collect massive data and harness that data using AI to better predict their business. They just announced good inventory levels. So, they can bring in new product without having to discount the old. Since yesterday, they've had a great run.

Retail very hard business. High amount of working capital tied up in inventory. Difficult to build competitive moat with lots of competition. Would not recommend buying. If stock price falls to 12x earnings - would be a good investment. Current valuation too high given return on capital for business. 

Retail has been hated this year, but TGT just reported a massive earnings blowout caused by good inventory management. 

It could hit $200. He's been very negative the consumer, but next year he expects retail stocks to do much better. He wants to add more Target.

It surged today after reporting. Target has lagged its peers because it hasn't produced positive same-store sales, a key metric, in ages. They reported big profits, though same-store sales and total revenue were okay and in-line. But they slashed inventories 14% YOY, less theft and transport costs normalize. Huge earnings beat. Pays a 3.4% yield which will look more attractive if the Fed holds rates, and if inflation declines, then the consumer will have more spending money.

Shares have been punished. If you really want retail, go to Amazon, TJX or Costco.

Not a value trap, but not one he'd buy. They household needs and wants, a 50/50 mix, are seeing a sharp decline in wants sales, though single-digit growth in needs. Not great shareholder returns, because e-commerce has taken share from bricks-and-mortar, which is Target's business.

Stress on consumers will benefit low cost retailers. 
$100 billion in sales very strong base.
Margins improving as supply chain difficulties improve.
Current share price a good place to buy.