Good morning investors!

Every Thursday we release our latest “Deep Dive” — a high level, easy to follow stock analysis designed to give our IE+ members an EDGE when it comes to properly valuing a company. We do the heavy lifting so you can make more sound investing decisions.

Today’s deep dive target is Target — the seventh largest retail company in the U.S.

In today’s article we will look at the company’s performance, recent results, and dive deeper into its valuation to determine whether the stock is a BUY, SELL, or HOLD as we begin 2024, based on our opinion alone.

Before we share our research, what are your thoughts on Target?

Alright, grab your shopping cart and let’s dive in.

Edge Score

We have been diligently working behind the scenes to develop several stock analysis systems for our members. Today, we would like to unveil our Edge Scoring System.

The system takes copious amounts of data and provides a score for 5 different metrics:

• Valuation

• Future Growth Projections

• Past Performance

• Financial Health

• Dividend

The system then takes these five metrics and provides an overall rating for the stock, which we will refer to as the Edge Score.

The model is still in beta testing and there will be adjustments to make the scoring as accurate as we can make it. In fact, Edge members in the Discord have had first access and already come up with great ideas and additions to make the scoring even better.

If this is something that interests you, join hundreds of other investors in the Edge+ Community and be among the first to get access to the new system!

Without further ado, here is our Edge Score for Target:

Company Background

Target Corporation, founded in 1902 by businessman George Dayton, is a prominent American retail chain that operates a chain of discount department stores and  hypermarkets, headquartered in Minneapolis, Minnesota.

The company has grown through expansions and acquisitions. Target, its first discount store, opened in 1962 and is known for offering upscale, trend-forward merchandise at affordable prices. As of 2023, Target operates 1,948 stores across the United States, solidifying its position as one of the largest American-owned private employers in the country.

Target's diverse product range includes clothing, household goods, electronics, toys, groceries, and more. 

Brian Cornell is the current Chairman and CEO of Target.

Source of Revenue

Target engages in the operation and ownership of general merchandise stores. It generates revenue through the following sources:

• Food, including:

  • Perishables

  • Dry groceries

  • Dairy

  • Frozen items

• Beauty and household essentials

• Same-day delivery

Company Financials

In this section we will go over the company’s recent earnings results and dive into their financial statements.

Recent Earnings Report

In its recent quarterly report, Target exceeded Wall Street’s expectations for both earnings and revenue in its fiscal second quarter, driven by increased store visits and higher sales of discretionary items like clothing.

Sales grew by 3% from last year to $25.45 billion, marking a return to growth after a period of slow sales and reduced profits. Net income surged over 40% year-over-year to $1.19 billion, or $2.57 per share, from $835 million, or $1.80 per share, last year.

Comparable sales were up 2%, with digital sales leading the growth at 8.7%. Discretionary sales, including apparel, improved by over 3%.

Despite the strong quarter, Target maintained a cautious outlook, expecting full-year comparable sales to be flat or rise up to 2%, likely on the lower end. However, the company raised its profit guidance, expecting adjusted earnings per share between $9 and $9.70, up from its previous range.

Target is up +8.0% since reporting earnings on August 21st.

Income Statement

Target’s 5 year revenue compound annual growth rate (CAGR) is +6.9% while its 10 year revenue CAGR is +4.2%. The retailer’s net income data is strong as well, with a 5 year net income CAGR of +7.3%.

Target has struggled since 2022 though as both revenue and income have declined. However, Target’s margins are improving over the past few quarters and earnings have shown significant growth.

The company looks to be turning things around and returning to its previous growth trajectory.

Here’s a breakdown of Target’s latest income statement:

Target’s annual income statement over the last 6 years:

Balance Sheet

Target’s balance sheet looks pretty good on the surface.

Thank you for joining us for this Deep Dive of Target.

If you enjoyed this deep dive, be sure to LEAVE A COMMENT. We look forward to hearing your thoughts on Target and our analysis. And let us know what stocks you want to see in the future.

Thank you, and until next time investors!

Mark & Chris

The Investor’s Edge

Disclosure

This deep dive is for educational and informational purposes only. The authors are NOT financial advisors, thus cannot recommend for you to personally to buy or sell any positions. Positions taken on a particular stock are opinions of the authors and only the authors. It is very important that you do your own research and make investments based on your own personal circumstances, preferences, goals and risk tolerance.