Is Target a target?

I have talked about Target (TGT) quite a few times as I like Target as a value stock. So whenever there was a big selloff for TGT, I was a buyer and so far I have been always a happier buyer since TGT has not let me down.  As you can see here, even the panic selloffof TGT due to graved concerns on its future due to Amazon’s competition has not deterred me from buying it. And again, TGT has come back big time from below $50 to now over $70. As I said, don’t just believe Amazon will kill all the retailers. Good retailers will find their way to survive. TGT is among them! Now I start to see rumors that Target may be a MA target and Amazon is most likely the one which wants to buy TGT. I also believe there is a reasonable possibility that TGT may be acquired some day but I doubt Amazon will be the one to do so. It could be more likely the hunter if Amazon had not already bought Whole Food. If Target is truly a target for MA, I think the buyer may be more likely someone that could surprise most of the people out there.

 

I think Ali Baba (BABA) is the one that may be more eager to buy TGT now. Why so? There are a few reasons:

• No double Baba is one of the most successful companies in China and is already among the top 6 companies in the world. But its great success so far is largely confined in the Chinese market where Amazon is almost nothing in terms of competition. Outside of China, it is totally a different story. Maybe just in India and Russia where Baba is doing better than Amazon, but in the world largest market, the US, Baba is nothing till now.  Like or not, I think Jack Ma is one of the greatest businessmen in terms of strategic visions. I have no doubt to believe that going out of China and successfully competing with Amazon is one of the top priorities for Ma, especially how to establish itself here in the US.  Baba certainly has its financial muscle to try from scratch but it is not only extremely costly but it will take a long time before it can meaningfully compete with Amazon. That’s why I think Baba may more likely take a shortcut by acquiring some well established retailer to jump start. I think  Target is a reasonable target for Baba due to its size, customers (relatively more affluent than Walmart’s customers) and widespread locations across the US. Honestly I was wondering why Amazon did not take out TGT but Whole Food in the first place. Target has already trying very hard for its online business that can be easily integrated into Baba’s very successful business model and at the same time, it can more effectively compete with Amazon for the future e-retailing that must be very cost efficient in terms of fast delivery. TGT’s locations everywhere in the US may become a great advantage for Baba by using drone delivery.
• You may not know that actually Target has already partnered with Alibaba's Tmall to sell in China. On top of that, BABA recently hired Former Target HR Chief to be their head of Global Expansion. So the connection between the two is not something trivial. Years ago, Jack Ma has started to talk about “new retail” and in his vision he defines it as “the integration of online, offline, logistics and data across a single value chain.”  Over the past decade, Baba has successfully established its own ecosystem and by leveraging it, they could provide companies with cheaper ecommerce and inventory management services. On top of that, Alibaba can provide even more cost savings via its financial, inventory, marketing, and data services. I think Target can be a great asset for Baba to use to realize its dream of this “new retail” in the US.  

I like Target as a value stock with high dividend growth regardless if it can be acquired or not. But if my wild speculation becomes true, it will be a great extra boost for my TGT position! Be aware though TGT has gone up quite a lot lately and it may be due for a pullback. If you want to buy, buy gradually or better buy when it is pulled back.