Target (TGT) Stock Analysis

Target Dividend

The Target dividend has been paid every year since 1967 and increased for 57 consecutive years; qualifying the company as Dividend King, Dividend Aristocrat and Dividend Champion.

Current Dividend Per Share Annualized: $4.48

Target (TGT) Intrinsic Value – Margin of Safety Analysis            

(updated December 2024) 

Normalized Diluted Earnings Per Share (TTM):  $9.43
Free Cash Flow Per Share: $9.82
Cash Flow From Operations Per Share (TTM): $15.91

Estimated Intrinsic Value: $164

Target Buy Price Based on Required Margin of Safety =  $137
(Required Margin of Safety Based On Risk Stability
Grade:
A = 0%, B = 20%, C = 30%, D = 40%, F = 50%)

Target SELL Price Based on Estimated Intrinsic Value = $205
(Allow Overvaluation Adjusted by Risk Stability Grade:
A = 40%, B = 25%, C = 15%, D = 5%, F = 0%)

Risk / Stability Grade: B

A grade indicates a quality company with a strong balance sheet, high earnings quality, and a positive business environment. These stocks require the slimmest margin of safety within the stock universe.

B grade indicates a company with a good balance sheet, good earning quality, and a stable business environment. The margin of safety required should be greater than stocks with an A grade but less than the average stock.

C grade indicates a company with a sufficient balance sheet, at least average earnings quality, and a reasonably stable business environment. The margin of safety required is greater than A & B stocks, but less than D & F stocks.

D grade indicates a company in good standing but has issues that could affect its stability and long term risks. D rated stocks should require a large margin of safety when purchased.

F grade indicates a company with significant issues that are currently affecting its stability and long term risks. Require an extremely large margin of safety for F rated stocks when purchased.

Financial Risk Grade:  B

A grade indicates an extremely low probability of a dividend cut. This rating is reserved for companies with strong balance sheets and/or excellent dividend histories.

B grade indicates a very low probability for a dividend cut.

C grade indicates a low probability for a dividend cut and/or average safety risk.

D grade indicates there are issues that should be considered concerning future dividend payments.

F grade indicates serious dividend safety risks. Investors should complete comprehensive due diligence before investing.

Business Quality Grade:  A

A grade indicates earnings quality is high or far above average.

B grade indicates earnings quality is good and/or above average.

C grade indicates earnings quality is acceptable or average.

D grade indicates earnings quality is poor and requires thoughtful due diligence.

F grade indicates the quality of the earnings is poor or far below average requiring serious due diligence.

Earnings Report: 10/31/24

AAAMP Portfolios Position Disclosures:
Treasure Trove Dividend (TTD) – LONG
Global Dividend Value-(GDV) – None
Dividend Growth & Income (DGI) – None
Global Value (GV) – None
Global Value Aggressive (GVA)- None
Global Conservative Income (GCI) – None 
Global Aggressive Income (GAI)  – None

Company Description

Sector: Consumer Defensive
Industry: Discount Stores

With 1,950 stores in the United States, Target generates over $100 billion in sales, and fulfills over 2 billion customer orders annually. The company is a leading general merchandise retailer offering a variety of products across several categories, including beauty and household essentials (24% of sales), apparel and accessories (20%), food and beverage (20%), home furnishings and decor (19%), and hardlines (17%).

Most of Target’s stores are large-format, averaging around 130,000 square feet. The company also has a significant e-commerce presence.

SWOT Analysis For Target

Strengths

Target has a well-known brand, convenient well-established locations and large economies of scale. The company is focusing on its U.S. business after an unsuccessful attempt at moving into Canada.

Target is benefiting from the continued decline of mall-based competition and department stores, which may drive strong growth in comparable sales.

Weaknesses

Most of Target’s competition (i.e. Wal-Mart, Costco, Kroger) have equal or better strengths (i.e. economies of scale). Sales per square foot ($290) fall far behind Wal-Mart ($420) and Costco ($1100). The company’s grocery business (15% of sales) is a fraction of its competitors and could be a candidate for big changes in the future.

Opportunities

Target is successfully moving to college campuses and into urban areas with smaller stores. This new format is showing promise by increasing sales per square foot, expanding profit margins, and improving returns on investment.

Threats

Like everyone in the industry, Target is threatened on the e-commerce side by Amazon. Lower margins are an industry trend because of intense competition. Like with all retailers, they are grappling with increased theft and dealing with cultural issues. 

Disclaimer:
While Arbor Investment Planner has used reasonable efforts to obtain information from reliable sources, we make no representations or warranties as to the accuracy, reliability, or completeness of third-party information presented herein. The sole purpose of this analysis is information. Nothing presented herein is, or is intended to constitute investment advice. Consult your financial advisor before making investment decisions.