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Investing.com - Bernstein raised its price target on Target (NYSE:TGT) stock to $87.00 from $86.00 on Thursday, while maintaining an Underperform rating following the retailer’s second-quarter results. According to InvestingPro data, Target currently trades at a P/E ratio of 10.87, suggesting a relatively low earnings multiple for the $44.9 billion retailer.
Target reported comparable sales declined 1.9% in the second quarter, beating analyst expectations of a 3.0% drop. The company saw a significant gap between brick-and-mortar comp sales of -3.2% and e-commerce growth of +4.3%, which created margin pressure as e-commerce remains margin dilutive. Despite these challenges, Target maintains a strong financial position, with InvestingPro analysis showing an impressive 4.62% dividend yield and a 54-year streak of dividend increases.
Gross margin came in 40 basis points below expectations due to markdowns, purchase order cancellations and mix shifts, despite advertising revenue growing 34%. EBIT margin exceeded expectations by 10 basis points as cost management helped offset increased SG&A investments, resulting in earnings per share of $2.05, beating estimates by 4 cents.
Target maintained its fiscal year 2025 guidance, projecting a low-single-digit decline in sales growth compared to consensus estimates of -1.7%, and adjusted EPS in a range of $7.00-$9.00 versus consensus of $8.25. Bernstein expressed concern about further uncertainties in the second half as consumers face increased inflation and lower real spending power.
The retailer also announced a CEO succession plan, with COO Michael Fiddelke replacing Brian Cornell. Bernstein noted that while Fiddelke was the most likely internal candidate, his leadership of Target’s omnichannel operations comes as the company faces challenges balancing sales and margins due to limited investment in automation and supply chain capabilities.
In other recent news, Target reported quarterly earnings that aligned with expectations and maintained its previous guidance, as noted by BMO Capital, which kept its Market Perform rating with a $95 price target. The company announced the promotion of COO Michael Fiddelke to CEO, which coincided with a 6% drop in stock value, though Guggenheim maintained its Buy rating and $115 price target, calling the market reaction an "overreaction." DA Davidson also retained a Buy rating but lowered its price target to $115 from $125, citing signs of improvement in Target’s quarterly performance that were "less worse than expected."
Jefferies joined in lowering its price target to $115 from $120 while maintaining a Buy rating, attributing the change to soft comparable sales and ongoing tariff-related pressures despite "encouraging results" in the quarter. Truist Securities reduced its price target to $102 from $107, maintaining a Hold rating and focusing on the CEO change following the second-quarter results. These developments provide a mixed outlook on Target, with various analyst firms adjusting their expectations and ratings based on recent performance and strategic changes.
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