TGT Dropped 6.3% In A Day. Have You Fully Evaluated The Risk?
Target (TGT) stock is down 6.3% in a day. The stock looks fairly priced at the moment, though history suggests you may benefit from buying dips – but the benefit is likely to be small. Consider the following data:
- Size: A $45 Bil company with $106 Bil in revenue currently trading at $98.69.
- Fundamentals: Last 12 month revenue growth of -0.7% and operating margin of 5.4%.
- Liquidity: Has Debt to Equity ratio of 0.4 and Cash to Assets ratio of 0.1
- Valuation: Currently trading at P/E multiple of 10.7 and P/EBIT multiple of 7.7
- Has returned (median) 5.7% within a year following sharp dips since 2010. See TGT Dip Buy Analysis.
While we like to buy dips if the fundamentals check out – for TGT, see Buy or Sell TGT Stock – we are wary of falling knives. Specifically, it is worth trying to answer if things get really bad, and TGT drops another 20-30% to $69.08 levels, will we be able to hold on to the stock? What is the worst case scenario? We call it downturn resilience.
Below is a deep dive into Target (TGT) downturn resilience – specifically, its performance vs the market during past crises? Turns out, the stock has fared worse than the S&P 500 index during various economic downturns. We assess this based on both (a) how much the stock fell and, (b) how quickly it recovered.
Below are the details, but before that, as a quick background: TGT operates as a general merchandise retailer in the U.S., offering products through physical stores and digital channels, with around 2,000 stores as of March 2022.
2022 Inflation Shock
- TGT stock fell 60.6% from a high of $266.39 on 16 November 2021 to $105.01 on 6 October 2023 vs. a peak-to-trough decline of 25.4% for the S&P 500.
- The stock is yet to recover to its pre-Crisis high
- The highest the stock has reached since then is $177.82 on 1 April 2024 , and currently trades at $98.69
| TGT | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -60.6% | -25.4% |
| Time to Full Recovery | Not Fully Recovered days | 464 days |
2020 Covid Pandemic
- TGT stock fell 29.0% from a high of $128.21 on 1 January 2020 to $91.04 on 25 March 2020 vs. a peak-to-trough decline of 33.9% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 4 August 2020
| TGT | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -29.0% | -33.9% |
| Time to Full Recovery | 132 days | 148 days |
2018 Correction
- TGT stock fell 31.5% from a high of $89.26 on 10 September 2018 to $61.13 on 21 December 2018 vs. a peak-to-trough decline of 19.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 21 August 2019
| TGT | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -31.5% | -19.8% |
| Time to Full Recovery | 243 days | 120 days |
2008 Global Financial Crisis
- TGT stock fell 63.8% from a high of $70.14 on 13 July 2007 to $25.37 on 9 March 2009 vs. a peak-to-trough decline of 56.8% for the S&P 500.
- However, the stock fully recovered to its pre-Crisis peak by 25 April 2013
| TGT | S&P 500 | |
|---|---|---|
| % Change from Pre-Recession Peak | -63.8% | -56.8% |
| Time to Full Recovery | 1508 days | 1480 days |
Worried that TGT could fall much more? You could take a look at the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.