As many as 110 million credit and debit cards were compromised last year when hackers breached security of Target Corporation, TGT. If you are a Target customer you can use cash and you probably want to talk to Target services, change your pin, etc. But, if you are a stock trader, how about trading Target stock after the data breach? There are trading opportunities related to every such fiasco. Not only was Target targeted by hackers but Niemen Marcus also was hacked. In trading Target stock after the data breach the Target Corporation market cap has fallen from $42.1 Billion to $34.9 Billion since the news of the breach. That is a lot of room for profit if the stock starts to recover and there is lot of room for profit in shorting the stock if things continue to get worse. Trading opportunities may also lie in the companies that will profit from switching the USA over to a different type of credit card, the EMV card. These cards use a tiny chip instead of a magnetic strip to hold data and they are substantially harder to hack and get personal data. The estimated cost of switching over ever card in the USA is $8 Billion. In each case market sentiment will play a large factor as this story plays out and timely technical analysis can often lead to tidy profits.
Trust, Sales and Class Action Suits at Target
To a degree Target is adopting a touchy-feely approach to the issue of losing the personal information of more than 100 million people. They are offering free credit checking services for a year but these services will only be offered if people agree not to sue. You can well believe that there will be at least one large class action law suit related to this fiasco and the effects on Target stock may well be long term. Anyone who is buying Target stock now hoping for an early rebound may be sadly mistaken.
Fixing the Credit Card Situation with EMV Cards
VISA plans to change all of its cards to EMV. After October 1, 2015 merchants who do not use EMV technology will be individually liable for fraud if the fraud could have been prevented with EMV technology. To make money from this mess one might just forget about trading Target stock after the data breach and look at who will prosper from reprograming all of those ATM machines and issuing new EMV cards. By the way, EMV stands for Europay, MasterCard and Visa. EMV is the global standard for inter-operation of integrated circuit cards, also called IC cards or chip cards. EMV uses a computer chip to hold information instead of a magnetic strip. The data in these cards is substantially more difficult to breach. When Europe adopted this standard, credit card fraud fell by fifty percent over the next two years. In the USA there are 400,000 ATMs, 2,000,000 payment card terminals and 600,000,000 credit and debit cards in use. To upgrade the credit and debit card system to reduce fraud they will need to create new cards and modify ATMs, which can be done on site with a replacement package.
Here is a very short list of companies whose stock may well rise based on the need to fix all of those ATMs, write all of those new programs, and issue all of those new credit and debit cards:
- Better ATM Services, Inc.
- Burroughs, Inc.
- Diebold, Incorporated
- Elan Financial Services
- NCR Financial Solutions
- Triton Systems
As always when trading stocks online in this regard, do your homework and watch the market carefully. The fundamentals are pretty clear but this matter will continue to get a lot of hype which may drive all related stocks up or down.