Target Corporation (NYSE: TGT) has raised the ire of activist investor Bill Ackman a few times over the years, to little effect. Target, which owns roughly 85% of the real estate under its stores, owns more than just discount locations. It's estimated that Target's real estate holdings alone are worth $30 billion. That's on top of the $50+ billion it makes every fiscal year in revenue. Does Target's share price reflect that fact?Of course not. Ackman's charge that Target's share price is grossly undervalued is never more true than it has been this year. As retail sales have slowed down, Target's sales have gone down as well -- but its core real estate holdings are still what they were in mid-2008 (they've gotten larger to boot). Ackman figures that replacing Target's real estate would cost $40 billion, and that the $42.96 price (as of this afternoon) is just too low. The one constant in the economy is real estate: there is a finite supply.
Is Target really a REIT in disguise? It could certain be looked at like that. Target trades at a lower multiple than most REITs, and Ackman figures there is at least $39 per share in value not being realized in Target's share price. While most analysts look at sales and profit (and same-store sales), Ackman looks at the larger picture.
If you own Target shares, are you appalled by its share price? If you're not into TGT right now, would a long-term position be in your best interest once Ackman wakes the market up to this $30 billion bombshell more than in the past? One thing is certain: we can't build more land, and Target owns a whole bunch of it. Do the math.
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Reader Comments (Page 1 of 1)
7-29-2009 @ 12:53PM
a said...
The article fails to discuss the current situation regarding commercial real estate in general. Sounds to me like the author is trying to hype the stock, just to sell off shares previously purchased, probably at much to high a price.
8-04-2009 @ 3:02PM
diane said...
I have gotten my pictures done in Targets since it came to Chambersburg, Pa.
Yesterday I went there in the morning to get lots of pictures developed and I was disappointed to find a lady with a bad attitude.
If i don't get a response back, I will stay away from there, there are other places to go.
i don't know what has happen to Bob Andrews, but he was the best.
I hope you take a good look at what is happening there because this is the first time for me and I won't be back till i here its getting better.
Thanks for letting me comment, it is to your best interest.
Diane