Something For The Market To Like
ESG issues, environment/social/governance, are becoming more and more important to today’s investors. Gone are the days of robber-barons, unsustainable ecological exploitation, and slave-like working conditions. In their place is a new breed of CEO, company, and investor, a breed determined to set the moral compass for businesses and investors to come. And Target is (TGT) on the cutting edge of that trend, at least in one regard.
Target has been working on a three-year plan to raise wages and benefits for its employees. The plan got a boost this year when the pandemic set in, Target gave its employees a temporary $2/hr raise with the intent of making it permanent by end-of-year, and today accelerated its plans again. Target will start paying all employees at least $15/hr starting July 5th. In addition, employees will receive a $200 thank-you-bonus for their efforts during the crisis and access to company-sponsored health benefits. You go Target.
Target Is Just Hitting Its Stride
Target has been growing revenue and earnings on a consistent basis since mid-2017 because of its relentless quest to improve comp sales, expand the footprint and, more recently, push into eCommerce. The company is expecting to see EPS dip 24% in the calendar 2nd quarter but so what? So are just about everybody else because of the pandemic. It cost money to cope with social distancing. What investors need to focus on is the rebound that is already underway.
The May Retail Sales figures are only the tip of the iceberg when it comes to how strong the recovery is. Within the report, there were a few bright spots including home improvement (up 16% YOY) and eCommerce (up 31% YOY). And not only are retail sales coming back, so too is the labor market. Along with them, pent up demand within the housing market has been unleashed and fueled by a new desire to live in the suburbs. All of which points to strength for Target.
Looking forward, revenue is expected to grow on a YOY basis this year and next, despite the pandemic. More importantly, revenue and EPS will both grow over the two-year period by high-single-digits proving the pandemic was merely a road-bump. Based on the trends, particularly in eCommerce, and the outlook for social distancing (we’re going to be doing it a while) Target looks well-positioned to continue delivering shareholder value for the foreseeable future.
The Dividend - Something For The Market To Love
If the ESG angle is something for investors to like, and the revenue outlook something to rely on, it is the dividend investors should love. To put it simply, Target is a Dividend King. Dividend Kings have been raising their dividends for at least 50 years which is an awesome feat when you think about it. Target has been raising its dividend every year since 1968. Its distribution plan has survived Civil Rights, the Vietnam War, Hyper-Inflation, the Oil Embargo, Iran, Afghanistan, the Cold War, the Tech Bubble, 9/11, the Housing Bubble and it will survive COVID-19. Don’t forget, there have been over a dozen major global health issues in the last 25 years alone.
At today’s share prices Target is paying about 2.5%. That’s not what I would call a high yield but it is better than the SPX average, much better than U.S. bonds, and about as guaranteed as a dividend can be. The company just raised its dividend with the last declaration, due to be paid September 10th, so there is time to get on board.
The Technical Outlook: It’s Only Halftime For This Rally
Target corrected in March just like every other stock in the market. Unlike most others, Target shares are already above the February highs and look like they are ready to rocket higher. One reason is that price action over the past few weeks smacks of consolidation. The consolidation looks a lot like a bullish triangle and if so, will lead this market higher in the very near future.
The indicators are consistent with strengthening support at this level so the ball is definitely in the bull’s hands. The stochastic is already firing a bullish crossover and a fairly strong-looking one so I expect to see price action continue to move sideways at least. Another confirmation of support at the current level would be my first signal to get into this stock, the next will be when price action exceeds the $124 level. After that, the long-term outlook is bullish with a move above $130 expected before the end of this year.
7 Semiconductor Stocks Set to Gain From the Chip Shortage
Who knew that something so tiny could create such a big problem? However, that’s the case with the semiconductor industry. Chip manufacturers are facing supply chain disruptions due to the Covid-19 pandemic.
Semiconductors are in high demand for the big tech companies who need the chips to power the servers for their data centers. But they are also needed for much of the technology we take for granted including laptops, tablets, mobile phones, gaming consoles, and automobiles – a sector that seems to be at the root of the current crisis.
Any weekend mechanic knows that even traditional internal combustion cars are heavily reliant on electronics. In fact, electronic parts and components account for 40% of a new, internal combustion vehicle. That’s more than doubled since 2000.
However as it turns out, some manufacturers may have overestimated how soon consumers would be ready for an “all-electric” future. And that meant that they didn’t forecast how much demand there would be for the kind of chips needed to do the mundane, but vital tasks of steering, braking, and even powering windows up and down.
Part of the problem is that U.S. businesses are heavily reliant on countries like China and Taiwan for their semiconductors. In fact, only about 12.5% of semiconductor manufacturing is done in the United States.
Of course, this creates a tremendous opportunity for the companies that manufacture these chips. And it comes at a good time. The semiconductor sector is notoriously cyclical and was coming down from the elevated demand for the 5G buildout.
In this special presentation, we’ll give you a list of seven semiconductor companies that you can invest in to take advantage of this opportunity.
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