Key Reasons Why Target Is Headed To $58
Target (NYSE:TGT), the world’s second largest retailer after Wal-Mart (NYSE:WMT), is leaving no stone unturned to stay competitive and strengthen its presence worldwide. Presently, it is focusing on various fronts including its first major foray internationally, strategic partnerships and online penetration. In this analysis, we discuss the key factors that drive Target’s stock and support our price estimate of $57.60.
See our complete analysis for Target here
Increased presence with mobile applications
- Target has launched various services on mobile to enable a simpler shopping experience for the consumers. It has launched a bar code scanner for the iPhone and Android devices that helps scan product bar codes with built-in camera to view item details, read reviews or add to lists.
- It has also launched a Shopping Lists application for Mobile Web, iPhone and iPad that helps in getting you organized and makes shopping easier.
- Recently, it introduced Shopkick, a mobile application that enables users to earn points in stores. Target could strategically use this app to connect with customers and induce them to make final purchase decisions.
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Innovations and promotions to entice customers
- In May, the company launched The Shops – a new merchandising program that features products from five boutique shops across the country. In July, the company plans to roll out a new series of fits in men’s apparel in both Merona and Mossimo collections.
- Target has also partnered with Grammy winner Norah Jones to sell to customers a deluxe edition of her new album, Little Broken Hearts.
- It also plans to re-launch its Target Home brand as Threshold with an assortment of entertaining essentials.
Focus on online efforts
- Target has launched a new version of Target.com to increase its online retail sales. Through this portal, it plans to provide a bigger assortment of products to its customers. It is focused on increasing its online sales as they still contribute a small portion of its gross sales.
International expansion plans
- Target has allocated approximately $2.3 billion to convert Zellers stores and integrate them into its retail network in Canada. It plans to open between 1oo and 150 stores in Canada, primarily in 2013.
- According to our estimates, the international operations contribute approximately 8% to Target’s valuation and has the potential to grow further. Target is also looking to enter other geographical regions including Mexico and Puerto Rico.
Opening smaller format stores
- Target earlier focused on the suitability of its large store format for a particular location which reduced its access to the country’s densely populated urban regions and space-crunched cities.
- It plans to introduce a smaller store format of 60,000 to 100,000 square feet compared with its typical format of 125,000 to 180,000 square feet. This will be done primarily to tap the urban markets. The first store is expected to debut in 2012 in Seattle.