Three Risks Facing Target Corporation (TGT) Stock

Page 1 of 2

I absolutely love Form 10-Ks, which most publicly traded companies are required by law to file every year with the SEC to provide a comprehensive summary of their businesses. Like an unsung hero of the financial world, 10-Ks give investors a chance to look through all the smoke and mirrors for a real glimpse of how their companies are doing.

Most notably, it’s worth perusing the “Risk Factors” section of any given 10-K. Just like it sounds, this block contains a comprehensive list of any significant risks currently facing the subject company.


Source: Target.com (NYSE:TGT).

Take Target Corporation (NYSE:TGT), for example, which has proven a tremendous investment in a solid long-term business, as the company has effectively managed many of its risks over the years. In fact, Target Corporation (NYSE:TGT) stock has not only risen more than tenfold over the past 20 years, but Target has also been able to raise its dividend 41 times in the nearly 46 years since its 1967 IPO.

Even still, Target Corporation (NYSE:TGT)’s most recent 10-K lists a total of 17 risk factors that could put the business in jeopardy. Let’s dig in, then, to explore three of the most significant of those risks facing Target stock today:

1. “If we are unable to successfully develop and maintain a relevant and reliable multichannel experience for our guests, our reputation and results of operations could be adversely affected.”
To be sure, Target Corporation (NYSE:TGT) is in the middle of a technological revolution, forcing it to make the most of not just its brick-and-mortar stores, but also to draw more business through online channels to compete with Internet-only behemoths like former partner Amazon.com, Inc. (NASDAQ:AMZN). As a result, Target must both maintain an edge with its traditional and mobile websites and manage customer perceptions through social media outlets like Facebook Inc (NASDAQ:FB) and Twitter.

Of course, Target Corporation (NYSE:TGT) certainly isn’t alone in this struggle; fellow Fool Rick Munarriz recently wondered whether Amazon’s showrooming effect may finally be hurting both Target and Wal-Mart Stores, Inc. (NYSE:WMT), especially after Target Corporation (NYSE:TGT) stock fell hard recently on weaker-than-expected quarterly results, hurt by a 0.6% decline in same-store sales. Wal-Mart, however, fared even worse by missing expectations on both its top and bottom lines on a 1.2% decline in comparable-store sales.

Meanwhile, last quarter Amazon.com, Inc. (NASDAQ:AMZN) managed to grow revenue by 22% year over year. Of course, Amazon is also developing multiple revenue streams, so not all of that growth came from its retail operations. What’s more, fellow Fool Travis Hoium recently pointed out that Wal-Mart Stores, Inc. (NYSE:WMT) and Target still have an edge — for now, anyway — while Amazon.com, Inc. (NASDAQ:AMZN) currently can’t match their ability to cater to errand-runners for essential items like milk, toilet paper, and produce.

2. “Our earnings are highly susceptible to the state of macroeconomic conditions and consumer confidence in the United States.”
At the end of 2012, all of Target’s 1,778 retail stores were located in the United States. By comparison, Wal-Mart Stores, Inc. (NYSE:WMT) currently operates more than 10,800 retail units spread across 27 countries.

Let it suffice to say, then, that both the state of the domestic economy and U.S. consumer confidence are massively important to determining whether Target stock can continue to outperform.

Page 1 of 2
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

Top 10 Most Expensive Luxury Cars in the World – 2014

Killer Small Business Ideas

The 50 Best Personal Finance Blogs

Most Expensive Apartments in New York City

Bloodiest UFC Fights Ever Fought

Most Expensive Rum Brands in the World

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!