This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why Target Looks Ready to Reward Long-Term Shareholders

Stocks in this article: TGT

NEW YORK (TheStreet) – Wall Street hates uncertainty.

Although retail giant Target (TGT) has yet to fully emerge from its data breach that impacted 70 million customers, one thing is certain, the company has seen the worst. Aside from having landed a new CEO in Brian Cornell, even more important for investors, the stock has bottomed.

Shares, at $58.55, are down 7.5% on the year to date.

Discount retailers haven't faired that much better. The entire sector has managed a decline of 1.19%, including Wal-Mart (WMT) , which has shed more than 4% in 2014. So on a relative basis, Target, which is has been a target for the bears, has done OK. The company now seems poised to get back on track.

Read More: 7 Stocks Warren Buffett Is Selling in 2014

With shares trading at a price-to-earnings ratio of 19, Target seems fairly valued. This is because when looking at Target's metrics such as revenue growth and price-to-book ratio, the company is priced in accordance with the industry average.

That said, based on 2015 estimates of $4.11 per share, Target's P/E drops to 14, or five points below the average P/E of 19. On a forward-looking basis, this is still one full point below the industry average.

In others words, Wall Street expects Target to be average (to slightly down) in the next 12 months. From my vantage point, this makes Target a great way to play both the re-acceleration of U.S. economic growth and the company's own turnaround potential. That, coupled with management's plans to fix Canadian operations can be significant earnings drivers for Target in 2015.

So at around $58 per share, which is still more than 15% below Target's 52-week high, I would be a buyer here. The stock is trading at just 0.5 times revenue. The industry average is 0.8. Unless there are more weather-related impacts to worry about, Wall Street will have no choice but to correct this mistake. This means that Target can still offer meaningful value just by meeting expectations.

Read More: 10 Stocks Carl Icahn Loves in 2014

To that end, if the company can surprise with an earnings beat (or two) in the next six quarters, these shares can reach $65 to $70 in the next 12 to 18 months. The company is implementing changes that should improve revenue growth and earnings in the coming years, including installing Mark Schindele to run Canadian operations.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,074.87 +44.66 0.25%
S&P 500 2,090.38 +8.50 0.41%
NASDAQ 4,799.6490 +26.1770 0.55%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs