Posted on Thursday, 14th January 2010 by admin
Target Corporation (TGT), a retailer that competes with Wal-Mart Stores, Inc. (WMT) and Best Buy Co., Inc. (BBY), had some good news today for its shareholders. Management has decided to reinstate its stock buyback program. According to the press release, the company believes the economic environment has improved to the point where reducing some of its float could be a worthwhile investment.
This buyback is a continuation of a $10 billion program begun back in November 2007. About half of that sum has already been spent; the remainder of the allocation is expected to be used up in two to three years. So, this isn’t an aggressive move, certainly. And, as always, evolving market conditions can affect the intended schedule.
Nevertheless, an investor has to take this as positive indication of the chain’s comeback. Back in November 2008, the board decided that it was in the company’s best interest to cease and desist repurchase activities. Times were different then, of course. Liquidity was the name of the game as the financial crisis unleashed fear upon the corporate citizens of the land.
Back in March 2009, Target had hit a low of $25 per share. Today, the price stands at better than $49. It’s really too bad management couldn’t have gotten some better prices for its buyback.
Still, this move should inspire confidence for the business on Wall Street. I can’t say this is an event worthy of a trade, however. The stock isn’t doing much on the news; plus, like I just implied, the shares have already seen a significant rise in value.
Mostly, it is an indicator that execs are confident in sales growth and future cash flows. And that’s the name of the game.
If you have been interested in Target but haven’t bought yet, perform your due diligence with an eye toward the long term, using this new buyback stance as part of your assessment.
Disclosure: I don’t own any company mentioned; positions can change without notice.
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