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?Pershing Square posts
FeedTarget: a retailer and a REIT
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?Ackman's target position has 'limited downside'
Even if Bill Ackman is unable to make humongous strategic changes or value-extracting deals for Target (NYSE: TGT), his investment in the retailer has limited downside, according to breakingviews. Although Ackman could potentially "push for a sale of Target's credit card business, a reengineering of its real estate portfolio, or more aggressive share buybacks," none of these seem very likely at present.Target probably wouldn't sell its credit card business because its becoming a more and more important contibutor to earnings. Moreover, reengineering the real estate portfolio or increasing the already-aggressive buyback would probably require borrowing. At the present time, borrowing at attractive rates is difficult.
Despite Target's rise in the last few years, the stock remains cheap. As breakingviews noted, the stock trades for just 14x earnings -- the same price as Wal-Mart (NYSE: WMT) -- despite growing much faster than Wal-Mart and possessing much more favorable growth prospects than Wal-Mart.
After soaring nearly 15% when Ackman's $2 billion investment in the company was rumored and revealed, the stock has come back to earth and retraced all of those gains. At these levels, Target is an appealing investment opportunity. The stock is undervalued vs. its peers and possessing loads of free options, most importantly the potential for Ackman to unlock value.
Target looks like an incredible long-term investment and I've been contemplating adding it to my long term buy and hold portfolio for the last month.
Option update: TGT, INTU & DELL volatility up into EPS
Target (NYSE: TGT) September implied volatility of 48 above 26-week average of 26.
TGT will report EPS on August 21st. TGT William Ackman's Pershing Square owns a 9.6% position in TGT. TGT September option implied volatility of 48 is above its 26-week average of 26 according to Track Data, suggesting larger price risks.
Intuit (NYSE: INTU) September implied volatility at 40 into 8/22 EPS.
INTU is expected to report an EPS loss 5 cents on 8/22 according to Thomson First Call. INTU will hold an analyst day on 9/27. INTU Quicken Personal Finance Software 2008 will be available for purchase at www.quicken.com on 8/27/07 and in stores on 9/9. INTU September option implied volatility of 40 is above its 26-week average of 29 according to Track Data, suggesting larger risk.
Dell (NYSE: DELL) September implied volatility at 42, November at 34 into EPS.
DELL is recently trading up $0.07 to $26.01. DELL will announce second quarter EPS on 8/30/07. Goldman Sachs says: "we expect more volatility in DELL's shares going forward driven by a larger divergence between reported earnings and consensus as DELL shifts its focus away from short-term earnings management to longer-term progress." DELL September option implied volatility of 42 is above its 26-week average of 27 according to Track Data, indicating larger price fluctuations.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
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