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Stock Market Showdown: Target Corporation (TGT) vs. Wal-Mart Stores, Inc. (WMT)

By U.S. News & World Report

Though the shelves at your local Target Corporation (ticker: TGT) and Wal-Mart Stores, Inc. (WMT) may be stocked well, you still won’t find any stock on those shelves — not the kind that makes investors wealthy, anyway.

Certainly, both companies have far transcended their humble beginnings — Target in suburban St. Paul, Minnesota, and Wal-Mart in Rogers, Arkansas. Yet today, they also stand at a challenging crossroads in a competitive digital age.

This year, Target shares are off roughly 8 percent. But as recently as May, the stock was on a tear, up 12 percent from January through April. Then came May’s second quarter earnings report, and investors punished Target after it aimed for the bull’s-eye but instead hit the bear’s behind.

While earnings rose 16.5 percent, sales missed forecasts and guidance from the company was glum. Between May 10 and 18, Target stock plunged more than 16 percent; it currently trades close to $69 per share.

[See: 7 of the Best Socially Responsible Funds.]

Wal-Mart, on the other hand, has enjoyed a steady climb this year, so gradual and sublime you couldn’t be blamed if you missed it. The stock, now trading at $72, is up more than 17 percent in 2016.

Wal-Mart has few if any threats so far as copycats to its brick-and-mortar model, though its Sam’s Club has a very close competitor in by Costco Wholesale Corp. ( COST). Yet like Target, Wal-Mart faces stiff headwinds from other corners of the retail sphere. Thus, there’s a strange apples-to-oranges parity between the two, and you don’t have to hit the produce section to spot it.

“While Target struggles to maintain a more than 6 percent lead over Wal-Mart in profit margin, Wal-Mart struggles to stay above the water from the inescapable e-commerce threat from Amazon.com (AMZN),” says K.C. Ma, director of the George Investments Institute at Stetson University in DeLand, Florida.

Indeed, Amazon continues to dominate all things e-commerce, and passed Wal-Mart in July of last year as the world’s largest retailer. But that’s not to say Wal-Mart has given up on the digital front — in fact, far from it.

Wal-Mart hopes to grow its online sales around 20 to 30 percent in the near term by leveraging its tremendous distribution platform to support digital sales growth. Still, the explosion of e-commerce sets up a curious scenario where Wal-Mart and Target could face unlikely competitors: themselves.

If nothing else, sales growth numbers may shed some light on where the companies stand. Figures provided by the investment analytics and financial research firm FactSet show sales growth hasn’t been the best of stories for either Wal-Mart or Target.

Since January 2013, Target has seen its growth decline from 4.9 percent to 1.6 percent in January of this year. Over the same period, Wal-Mart fell from 5.7 percent to -0.7 percent. Looking ahead, it’s not much better: FactSet numbers project that by January 2017, Wal-Mart will inch up to 1 percent sales growth — while Target will slide 5.6 percent.

“By investing $2 billion in labor, health care and employee training for next two years, the benefit is immediate: Wal-Mart shareholders have been rewarded 5 percent for last six months,” Ma says. Target, citing improvements “not recognized by the market,” has seen its strategic shift met with returns of -4 percent.

But at least on the social media front — a metric that holds one key to retail success — Target clearly holds the lead. NetBase’s “Social Media Industry Report 2016: Retail Brands,” examined the overall performance of 60 leading retail brands across social channels. On the one hand, the social analytics company found Target and Wal-Mart close in terms of social outreach.

[See: 20 Awesome Dividend Stocks for Guaranteed Income.]

“Target was second in mentions and Wal-Mart fourth,” says Paige Leidig, CMO at NetBase. “Target’s reach, mentions and awareness ranks were all comparable. But Target’s brand passion index ranking was 41st while Wal-Mart’s was 51st, suggesting that Target conversation was both more positive and more passionate.”

No. 1 on the mentions rank? Amazon. Tiffany and Co. (TIF) scored tops in the brand passion category. But if there were such thing as the broker passion index, the luxury jeweler would hold all the appeal of cubic zirconia: TIF stock is off almost 4 percent for the year.

Meanwhile, the rise of dollar stores proves that some outlets can out-bargain a Wal-Mart or Target bargain. Wall Street types are definitely noticing: Dollar General Corp. (DG) in particular was high octane, up 26 percent this year until August. A disappointing earnings report tripped up DG stock, but nine out of 20 analysts still rate it a “strong buy.”

What’s more, TGT and WMT stand apart from their retail peers for dubious reasons. Both have been dogged in recent years by bad publicity and a costly aftermath. Target’s big data breach of 2013 whacked 40 million customers, and almost singlehandedly accelerated the adoption of EMV chip-based credit cards in the U.S. (Yes, Target takes them.) All told, the breach cost Target $252 million.

Yet that’s chump change compared to the setbacks Wal-Mart weathered after getting drubbed for its draconian labor practices. In response, the company enacted reforms that began last year and will increase wages by a total of $2.7 billion. And while that has made the worker bees happier, market watchers consider it quite the buzzkill.

After the breach, Target made a smart move to right the ship. New CEO Brian Cornell, who came on board in August 2014, closed Target’s underperforming Canadian operation and focused on transparency with the U.S. customer base.

Cornell has also heralded a shift to a more focused consumer strategy and it’s working, Ma says: “While Wal-Mart has been struggled to find the sweet spot to match the right prices and quality of products to carry, Target has returned to smaller, healthier, high-end stores with higher profit margins.

So which mega retailer holds the advantage in the end? In the spirit of the political season, Ma makes his forecast:

[Read: Why October is Crash Month on Wall Street.]

“Forward-looking valuation models suggest that WMT has a fair value around $80, approximately 9 percent undervalued. TGT has a fair value of $74 with 7 percent undervaluation,” he says. “So if the election happened today, Wal-Mart would win.”

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Stock Market Showdown: Target Corporation (TGT) vs. Wal-Mart Stores, Inc. (WMT) originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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