Domain Daily: Tide Turning for Target?

The Dose

  • New Target for Target

  • Alibaba's Challenge

  • Bonds Are Back

Wells Fargo Analyst Gets Bullish on Target

Wells Fargo analyst Edward Kelly said the sell-off in Target's stock has gone too far. Kelly raised his price target for the retailer's shares to $195 from $155.

The Point: As we've discussed previously, big box retailers have had a rough year. Target and Walmart are inundated with inventory and have resorted to steep discounts to clear their shelves. And while that's an ongoing process, Kelly says the worst is likely over. As a result, the analyst thinks Target's shares currently present "the opportunity to pick up a proven share gainer." What that means is that Kelly thinks Target’s stock has room to run. Kelly's new target price of $195 is about $10 more than the consensus estimate.  

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Alibaba Fights to Keep Its Stock on Wall Street

The U.S. Securities and Exchange Commission has said that Alibaba isn't compliant with the Holding Foreign Companies Accountable Act. Foreign companies unable to meet the regulation's requirements are subject to removal from U.S. stock exchanges.

The Point: In 2014, the Chinese e-commerce giant IPO'd on the New York Stock Exchange for $25 billion. At the time, that was the biggest initial offering on record. Less than a decade later, it's fighting to maintain access to U.S. capital markets. We'll leave the legal analysis to someone else. Instead, we'll focus on this simple fact: U.S. financial markets are the deepest and most liquid in the world. Losing access to American dollars almost certainly results in a company's cost of capital becoming more expensive. And it's because of that, Alibaba plans to fight back against the SEC's decision.  

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Apple Sells Bonds to Buyback Stock

The tech giant plans to sell bonds in four parts to raise money for stock buybacks and dividend payments.  

The Point: You might be wondering why we're talking about a bond sale here. But it's for a good reason. As interest rates have spiked these past few months, the bond market has seen activity plummet. That's not good news for the economy or for stock markets. Why? Because a slowdown in borrowing is a sign that companies are worried about the economy's direction. In short, no one wants to borrow money if they don't think they'll be able to repay it. Apple's return to the bond market indicates that higher rates won't hamper high-grade companies from accessing capital. Of course, it's just one company, and Apple's ability to borrow was never questioned. Still, it's an encouraging sign for the markets at large.  

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