What Twitter Can Tell Us About Target

Twitter isn’t just the talk of Wall Street at the moment; it can also provide valuable information to investors about other companies and potential investments.

Jan 14, 2014 at 5:30PM

Now that the holiday season is over, let's take a look back at an interesting trend for Black Friday, the biggest shopping day of the year. This often-discussed and fretted-about day is of extreme importance to retailers like Target (NYSE:TGT).

According to social-media analytics company Crimson Hexagon, on Black Friday 2013, there were 90,000 tweets about Target. During the 10 days beginning on Thanksgiving, there were 640,000 Target-focused tweets. That's an enormous number, and it looked as though Target would continue to be an underrated, high-quality big-box retailer. 

However, with the exception of a few criminals, no one knew what was about to happen. The unfortunate event, of course, was the data breach that affected approximately 40 million consumers. This led to even more Target-focused Twitter (NYSE:TWTR) conversation, but not in a positive way.

The big day
On Dec. 19, 2013, the day the data breach was revealed, Target was mentioned 160,000 times on Twitter. During the 10 days beginning on Dec. 19  there were 894,000 Target-related tweets. The news about the encrypted PINs helped maintain the momentum.

According to Crimson Hexagon, the majority of these tweets were recycled news stories, opposed to opinions. That's why the company has classified Target's social-media sentiment as neutral opposed to negative. However, even if it was mostly the same news stories being retweeted, these news stories still conveyed bad news for customers.

Also consider that three of the top 10 words used in Target-related tweets for the 10 days beginning on Dec. 19 were breach, stolen, and data. These types of terms are not going to lead to more people running out to Target or visiting its website to place orders. All of this bad news, seen by hundreds of thousands of people, increases the odds of sales declines, especially on a comps basis.

As you read this story, you might recognize the power of Twitter. From a social-media standpoint, it's extremely powerful, and it's possible that Twitter will find a way to monetize that power in the future. However, if you're considering an investment in Twitter due to its sway, keep in mind that it's far from the ideal option for Foolish investors, given its lack of profitability and the extremely high volatility of its stock. Right now, it's better suited for gamblers. The good news is that all this negative sentiment about Target means good news for one of its peers.

Revenge of the big-box juggernaut
Target and Amazon.com have consistently been infringing on Wal-Mart Stores' (NYSE:WMT) territory. Despite the increased competition, Wal-Mart has held its own, delivering a little top-line growth and large capital returns to shareholders, which isn't a bad trade-off for any value investor.

While recent Target misfortunes won't help Wal-Mart steal market share from Amazon, it's likely to lead to market share gains for Wal-Mart versus Target. I have written about this several times already, but I will pound my fist on the table until my knuckles bleed.

If 40 million Target customers are in danger of being victims of fraud, then at least some of those customers will lose trust in the retailer and choose an alternative, where they feel comfortable using their debit and/or credit card. These retailers include Wal-Mart, Amazon, and to a lesser extent, Costco. However, the focus here is on Wal-Mart, since most consumers still prefer to shop in person and Wal-Mart stores can be found in, or close to, almost every town or city in the country.

While Target took the high-expectation Titanic approach to the holiday season, Wal-Mart went with the UPOD, or under-promise/over-deliver, alternative. Even if Wal-Mart were to miss expectations, its ability to generate enormous cash flow ($23 billion in operating cash flow over the past 12 months) gives it the ability to increase capital returns to shareholders if necessary. Furthermore, contrary to common perception, Wal-Mart has outperformed Target over the past year in stock appreciation: 18.2% versus 9.9%.  

The Foolish bottom line
Target has stumbled in a big way, and any near-term upside surprises would be shocking. While this is still a possibility, investing in Wal-Mart doesn't just present less risk, but the possibility of market-share gains. And even if market-share gains don't take place, Wal-Mart is a cash-flow-generation machine. Therefore, despite significant stock appreciation being unlikely, investors are likely to see methodical and safe returns. 

The Motley Fool's Top Stock for 2014
There’s a huge difference between a good stock, and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it’s one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

Fool contributor Dan Moskowitz has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Costco Wholesale, and Twitter. The Motley Fool owns shares of Amazon.com and Costco Wholesale. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers