Missing The Target In Canada
Target (TGT) has been having some trouble recently. Not only have they experienced trouble on the home front as a victim of a cyber-crime, but recent reports are now divulging the retail company’s struggles in Canada.
Canada is Target’s first foray into international expansion. However, after only one year, the company has lost $1 billion US dollars. High expansion costs and disappointing sales, along with competition from Wal-Mart, have left the company reporting extremely low net earnings. Some analysts are ready to SELL TGT after the numbers they’ve seen, while others are recommending BUY TGT, relying on low expectations that TGT can meet.
5-star analyst Brian Sozzi recommended SELL TGT in light of the data breach and the poor results in Canada. Brian stated 5 key takeaways supporting his SELL recommendation including, “Same-store sales, which declined by 2.5 percent, is under-performing its largest competitor Wal-Mart.” There has also been a “decline of 20bps in the U.S. – a touch more of a drop off than we have come to expect from Target.” In regards to Canada, Brian said, “gross margins are shockingly low at 4.4 percent, compared to the U.S. at 27.6 percent.” Target also, “hasn’t announced share repurchases in the quarter, as doing so could negatively affect its credit rating.” And finally, “Target’s inventory rose 10.81 percent in the quarter, and looks especially poor when compared to Wal-Mart’s inventories increase of 2.4 percent in the quarter.”
Brian recommended SELL TGT earlier this year at the first sign of trouble and saw positive results. Even though shares rose following the cyber-data-breach, Brian stated, “Despite Target’s many attempts to rebuild relationships, [I believe] there can be no assurance affected consumers will return.” And added, “the cost of rebuilding these relationships suggests a less aggressive move than has been presented to investors.” Brian has a 4.4% average return over S&P-500 and a 56% success rate of recommended stocks.
On the other hand, analyst Brian Yarbrough of Edward Jones recommended BUY TGT, despite the lack of success in Canada. Brian Yarbrough didn’t have high expectations for the company after the hacker scandal and found some hope when some of the reports numbers matched his prediction. Yarbrough said, “Expectations were so low going in, this offered a ray of hope.” Brian has a -1.6% average return over S&P-500 and a 33% success rate of recommended stocks.
Target is not having a great year, but that doesn’t mean your portfolio has to suffer, as well. Whose advice do you trust to keep your portfolio on point? Download Tipranks to review each analyst’s past recommendations and performance statistics and start making informed financial decisions with advice you can trust.