Not every investment has to be as exciting as cryptocurrency or a “meme stock.” There’s nothing wrong at all with steady growth, and folks who’ve invested in Target (NYSE:TGT) have earned consistent returns. So, is now the right time to take a position in TGT stock?
Whether you’re aggressive or defensive in your investing style, the answer is yes. During the past year, Target has proven itself as a resilient retailer during the most challenging circumstances.
Some value-focused traders might express concerns that TGT stock has run up too much. When we look closer at the data, we’ll see that there really shouldn’t be any major concerns about Target’s valuation.
And in the final analysis, I believe we’ll find that this famous big-box retailer deserves to have a place in just about any long-term investment portfolio.
TGT Stock at a Glance
Target’s been around since 1902, but we don’t need to look back that far in analyzing the share price. Just the past year should be enough to convince any skeptics and doubters that this one’s a great stock for momentum-focused investors.
The onset of the Covid-19 pandemic created havoc for some stocks in 2020, but not for TGT stock. A year ago, the shares were worth $113 and change; pretty soon, they might be worth twice that amount.
Fast-forward to now, and the stock is trading at around $207. Does this mean that the shares are over-valued?
As it turns out, TGT stock has a trailing 12-month price-earnings ratio (P/E) of 24.15. That’s quite reasonable, and suggests that the company’s earnings are sufficient to justify the share price.
Moreover, Target pays out a forward annual dividend yield of 1.3%. That should sweeten the deal for income-oriented investors who like to hold their stocks for the long term.
A Strong Foundation
During the Covid-19 pandemic, not all retail stores were financially successful. Generally speaking, providers of essential goods fared better than stores that offered non-essential (luxury) goods.
Target is known for providing essential goods at reasonable prices. That business model has served the company — and the shareholders — very well over the years.
The data supports the growth of both the business and the share price. During the three most recent fiscal quarters, Target’s comparable store sales (known in the industry as “comps”) have increased by over 20% on a year-over-year basis.
Not only that, but for Target’s most recently reported full fiscal year, earnings per share increased by a whopping 36%.
Additionally, CEO Brian Cornell seemed to express confidence that Target will maintain its positive growth trajectory.
“As we look ahead to 2021 and beyond… we see continued opportunity to invest in our business and our team, building on the strong foundation we’ve established,” Cornell said.
A Reasonable Target for Target
After having broken through the $200 price barrier, is there more room to run for TGT stock?
Stifel analyst Mark Astrachan certainly seems to believe so. Not long ago, the analyst reiterated his “buy” rating on the stock, while also raising his price target from $220 to $230.
In turn, I would say that this is a perfectly reasonable price objective for TGT stock. As Astrachan points out, Target’s “valuation multiple remains undemanding, trading at a discount to certain retail winners.”
Again, the stock’s P/E ratio is reasonable even after the share-price rally. Therefore, unless the company’s earnings growth deteriorates, there’s no reason to believe that Target shares can’t reach $230 at least.
The Takeaway
TGT stockholders have enjoyed consistent returns over the years, and particularly during the past year.
Can the rally persist? It certainly can, as Target maintains its growth trajectory as a reliable provider of essential goods.
On the date of publication, Louis Navellier had a long position in TGT. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article.
The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
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