The American retailer Target Corporation (NYSE:TGT) is the second largest discount retailer in the U.S, after Wal-Mart Stores, Inc. (NYSE:WMT). Though the company’s stock has done really well in the last few years, the company itself has not done justice to its growth potential. In 2012, Tarhet yielded a YTD return of almost 24% to its investors. However, during the last five years, the company has yielded an average growth of just 2.7% amid tough competitors like Wal-Mart Stores, Inc. (NYSE:WMT) and Costco Wholesale Corporation (NASDAQ:COST) . According to the company, it has massive plans of expanding itself globally in the next few years. Now, the big question is what is in store for Target Corporation in 2013?
When it comes to spending in the retail industry, American consumers haven’t shown much intent lately amid less disposable income. Therefore, retailers have been forced to operate on low profit margins. As a result, Target has announced that it would soon be going global. As part of this plan, the company would be opening 124 stores in Canada in March.
During the last few years, Target’s major competitor, Wal-mart, has consistently expanded itself in major economies. According to analysts, Target may eventually expand in Europe and emerging markets. Target Canada President Tony Fisher said “We always knew at some point that international expansion was going to be a part of our history.” Canada would give Target a fair idea about operating in a new country. As Tony Fisher mentioned “We’re going to learn how to translate our brand in a different language for the first time, learn how to build a brand new team in a brand new country.”
New mobile service partners
Target recently announced that it has chosen Brightstar and MarketSource as its new service partners for Target Mobile. Brightstar is the world’s largest specialized wireless distributor, providing services to mobile device manufacturers, wireless operators and retailers; whereas, MarketSource is a market leader in designing innovative sales and marketing services. By April, 2013, Brightstar and MarketSource would replace Target’s current service partner, RadioShack Corporation (NYSE:RSH). Brightstar would be taking care of Target’s supply chain and point-of-activation technology provider, while MarketSource would be responsible for in-store sales and services.
Currently, Target Mobile wireless shopping stations are available at 1500 stores in the U.S. where customers can buy mobile phones and contracts from their favorite service providers. Target’s Vice President for Electronics, John Butcher said “Collaborating with Brightstar and MarketSource will further enhance Target’s position in the wireless retail marketplace.”
Target is trading at a forward P/E (1yr) of 12.7x which is the least in the industry; hence, it’s a great bargain. It’s earning a healthy 19% return for its shareholders, plus a payout of 32% shows that the company is keen on returning money back to its shareholders. A dividend yield of 2.3% is also one of the best in the industry. A PEGY of 0.99 depicts that it is undervalued to a great extent and has huge upside potential. Moreover, a mean target price of $70.06 on the sell side shows that Target is undervalued by almost 15%.