Has Target Lost Its Momentum? - Analyst Blog


Target Corp. ( TGT ) has been in troubled waters, ever since it saw its worst security breach ever, which affected 70 million customers and subsequently led to the trimming of the earnings guidance. This Zacks Rank #5 (Strong Sell) stock has lost much of its momentum with shares crashing to a 52-week low of $57.38 yesterday.

Since the announcement of the breach, Target has lost 7.1% of its market capitalization. The average volume of shares traded over the last 3 months was approximately 5,964K. Moreover, the company currently trades at a forward P/E of 18.20x, a 1.9% discount to the peer group average of 18.56x. The long-term estimated earnings per share (EPS) growth rate is 9.2% compared with its peers group average of 11.9%.

Target faced its worst security breach when information related to credit and debit card holders were hacked. The theft occurred during the holiday season, from a day before Thanksgiving up to Dec 15. The company publicly recognized the breach four days later on Dec 19, 2013. Recently, as part of the ongoing inquiry, Target had disclosed that the data theft included names, mailing and email addresses as well as phone numbers.

As a result, Target trimmed its fourth-quarter fiscal 2013 guidance and now expects adjusted earnings per share for its U.S. segment in the range of $1.20 to $1.30, compared with the previous projection of $1.50 to $1.60. Further, comparable-store sales are expected to decline 2.5% in the fourth quarter as against flat comps forecasted earlier.

Moreover, Target, as per media reports, has been slapped with several lawsuits over the security breach in the past few days, which have intensified its legal woes. We feel that more troubles could be looming ahead for Target.  

Recently, media reports also suggested that Target is dismissing 475 employees worldwide and will no longer fill up about 700 vacant positions to reduce costs. Earlier, Macy's Inc. ( M ), Wal-Mart Stores Inc . ( WMT ) and J. C. Penney Co., Inc. ( JCP ) had announced layoffs as part of their cost-cutting initiatives.

We believe that Target will take some time to regain the confidence of customers. Notably, the company has extended help to aggrieved customers by offering one year of complimentary credit monitoring and identity theft safeguard. Target's customers have three months to register for the program. At the same time, it is improvising the security system to avoid such reoccurrences in the future.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: EPS , JCP , M , TGT , WMT



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