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

The 10 Most Expensive Law Schools in the US

The 10 Best Wall Street Movies

The 10 Most Expensive Golf Clubs Ever Sold

The 10 Most Expensive Golf Memberships

The 10 Best Disney Characters Ever Created

The 8 Best Foods for Gaining Weight

The 10 Most Expensive Colleges in the World

The 7 Most Memorable Ad Campaigns of All Time

The 7 Most Expensive High Schools in the World

The 10 Electric Vehicles with the Longest Range

The 10 Cities with the Worst Drivers in the World

The 10 Most Expensive Dresses Ever Created

10 Islands to Visit Before You Die

10 Famous Celebrities Who Needed Rehab

The 15 Countries with the Largest Oil Reserves

The 10 Most Overused Excuses in the World

The 5 Best iOS Apps You Can’t Get on Android

5 Companies Damaged By Social Media Blunders

The 10 Most Legendary Blues Songs

The 10 Most Lawless Places in the World

4 Reasons China is a Threat to the US

The 17 Most Sugary Drinks in the World

The 10 Most Ruthless Rulers in History

The 10 Greatest Generals in History

Top 8 Travel Destinations for 2015

The 10 Safest Dog Breeds for Children

The 10 Most Stolen Vehicles in the US

The 7 Most Expensive Celebrity Weddings

The 10 Best LoL Teams in the World

Top 10 Worst Marketing Campaigns Ever Produced

Top 5 Diets that Help You Lose Weight

The 10 Best Ways to Stay Awake

7 Artists That Switched Musical Genres

The 10 Most Expensive Cities to Live in New Jersey

The 10 Best High Schools in New York

The 10 Countries With the Least Gender Inequality

The 6 Biggest Musician-Manager Feuds

The 10 Countries with the Cheapest Gas Prices

The 7 Most Theatrical Bands of All Time

The 8 Worst Band Breakups of All Time

The 10 Most Important South American Leaders

The 7 Most Successful Casting Show Winners

The 10 Most Peaceful Countries in the World

5 Big Reasons Communism Failed

The 15 Most Famous Carl Icahn Quotes

10 Scary Animals that are Actually Harmless

The 8 Most Famous Singer-Actors in Entertainment

The 10 Longest Wars of All Time

The 13 Worst Looking Foods that Taste Great

The 6 Most Gruesome Injuries Suffered During a Sports Match

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!