Businesses with profit have several options when it comes to allocating it. Investors prefer it be returned to them as dividends or buybacks, but businesses know they have to use profit to improve. In fact, Target (NYSE:TGT) revealed that it was planning to reinvest in its staff, which caused shares to slip in today’s trading.
This move should have long-term value implications as better staff tends to mean better service, which can blunt the effects of an economic downturn or augment the effects of good economic times. More specifically, Target will reinvest in its staff by doubling their bonuses. However, only some employees will benefit from this, specifically “…salaried, non-senior executive employees.” The bonuses will go out at the end of March.
Mug Mayhem
Yet there’s an unexpected problem brewing at Target locations, and it all focuses on mugs. There’s an upside to this problem, as Stanley—makers of the Stanley tumblers that kept fans frantically searching Target locations to buy them—plans to drop its new spring line starting March 24. Assuming a similar reaction is had to this batch, look for more lines outside Target stores ahead of opening.
Meanwhile, Nestle USA recalled over 440,000 gift mug sets branded with the Starbucks (NASDAQ:SBUX) logo due to a potential scalding hazard. Microwaved or filled with hot liquid, the mugs can overheat or break apart, which may not only scald but potentially lacerate, depending on how the mug breaks.
Is Target a Buy or Sell Right Now?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on TGT stock based on 19 Buys and 10 Holds assigned in the past three months, as indicated by the graphic below. After an 11.83% rally in its share price over the past year, the average TGT price target of $177.11 per share implies 3.84% upside potential.
