Can Target survive the Coronavirus? — Market Mad House

Interestingly, Target’s (NYSE: TGT) stock regained most of the value it lost in the first half of 2020.

To elaborate, Target started 2020 at $126.07 on 2 January; fell to $91.04 on 25 March 2020 and rose to $121.70 on 17 July 2020 and $125.88 on 31 July. Hence, Mr. Market still believes in Target despite several months of a pandemic.

Image for post
Image for post
By Farragutful — Own work, CC BY-SA 4.0,

One reason for Mr. Market’s new faith in Target is online sales. For example, Target became one of eMarketer’s U.S. Top 10 online retailers for the first time in 2019. eMarketer predicts Target’s ecommerce could grow by 24% to $8.34 billion in 2020.

Target Turning stores into Fulfillment Centers

Image for post
Image for post

Importantly, Target was expanding its online capabilities before coronavirus. For instance, Target is trying to remodel 1,000 locations to create mini distribution centers in its stores, SupplyChainDive reports .

Target management hopes to support free two-day and same-day delivery from the stores, SupplyChainDive reports. Target offers same-day delivery from 1,500 stores in 47 states.

Is Target Making Money?

Image for post
Image for post

For instance, Target’s quarterly operating income fell from $1.197 billion on 31 January 2020 to $468 million on 30 April 2020. In addition, Target’s quarterly gross profit fell from $6.342 billion on 31 January 2020 to $5.105 billion on 30 April 2020.

Similarly, Target’s quarterly revenues fell from $23.398 billion on 31 January 2020 to $19.615 billion on 30 April 2020. Plus, Target’s quarterly common net income fell from $834 million on 31 January to $284 million on 30 April 2020.

Is Target Generating More Cash?

Image for post
Image for post

Impressively, Target’s quarterly ending cash flow rose from $1.608 billion in $4.566 billion in the same period. Thus, Target has more cash.

Unfortunately, I think Target borrowed much of that cash. To explain, Target reported a $1.449 billion financing cash flow on 31 January 2020. The financing cash flow measures the amount of cash a company by selling debt or issuing bonds.

How Much Cash Does Target have?

Image for post
Image for post

I think this cash could help Target expand online because it could have the money to convert hundreds of stores to fulfillment centers. In addition, Target has the funds to buy or lease hundreds of delivery vans and hire thousands of delivery drivers.

Additionally, Target has the funds to expand its Shipt delivery platform. Shipt offers same delivery without a membership.

Is Target a Safe Investment?

Image for post
Image for post

In particular, Amazon Prime’s U.S. membership grew to 118 million on 31 March 2020, Consumer Intelligence Research Partners estimates. Moreover ,the percentage of free Amazon Prime trials converting to full-time subscriptions grew to 70% in 1st quarter 2020.

Hence, Target’s most dangerous competitor is expanding its reach as coronavirus discourages Americans from shopping. Therefore, Target needs to shift to an online retailer and fast.

Under these circumstances, I think Target’s margin of safety is low. However, many investors still think Target is a safe investment.

Is Target a Good Dividend Stock?

Thus, Target’s dividend is still growing. However, I think the risks Target faces make its stock too dangerous for ordinary people.

Originally published at on August 1, 2020.

Written by

Daniel G. Jennings is a writer who lives and works in Colorado. He is a lifelong history buff who is fascinated by stocks, politics, and cryptocurrency.

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store