Skip to Content

Target Corp TGT

Rating as of

Morningstar’s Analysis

Valuation
Currency in USD
Is it the right time to buy or sell?
Find out with Morningstar Premium
Is it the right time to buy or sell?
Find out with Morningstar Premium

1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Capital Allocation

PREMIUM

While Shoppers Continued to Flock to Target in Q2, Shares Fail to Offer Investors a Bargain

Erin Lash, CFA Sector Director

Analyst Note

| Erin Lash, CFA |

We don’t expect to materially alter our $151 fair value estimate for no-moat Target (beyond a low-single-digit rise for time value) after digesting the firm’s stellar second-quarter results. Comparable sales popped 8.9% in the period, an impressive feat on top of the 24% marks chalked up last year. Similar to the sequential quarter, Target’s growth primarily emulated from the store channel (which boasted comps of 8.7% on top of 10.9% gains a year ago), showcasing that consumers are returning to brick-and-mortar outlets as vaccination rates have increased. However, sales through the digital channel are continuing to outpace prepandemic levels (around 17% of total sales, up 1,000 basis points relative to 2019), which we think illustrates consumers’ desire for convenience. We recognize that this could manifest in increased fulfillment costs for Target over time, though, compelling the retailer to expend resources to continuously enhance its omnichannel service offering. Although this top-line growth came with modest contraction at the operating margin line (down 20 basis points relative to the second quarter of fiscal 2020 to 9.8%) in the quarter, we attribute this degradation to higher merchandising and freight costs--factors that are eating into profits for firms across a vast array of industries.

Read Full Analysis

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 Jul 31, 2021
Fiscal Year End Jan 29, 2022
Stock Type Aggressive Growth
Employees 409,000

Related

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.