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Investing.com - BofA Securities has reiterated its Underperform rating and $93.00 price target on Target (NYSE:TGT) stock, citing increasing long-term sales and margin risks. The $43.39 billion retailer, which InvestingPro analysis shows is currently trading below its Fair Value, maintains a solid 4.33% dividend yield with a 54-year history of consecutive dividend increases.
The investment firm pointed to Target’s slowing digital sales growth and lack of scale in digital advertising and third-party marketplace as key concerns. BofA noted that Target continues to lag behind Walmart (NYSE:WMT) in sales trends, particularly in digital channels.
Target faces elevated tariff exposure compared to Walmart, according to the analysis. The firm also highlighted pricing and merchandising headwinds as additional challenges for the retailer.
BofA Securities expressed concern that recent merchandising leadership and partnership changes, including those with Ulta Beauty (NASDAQ:ULTA), could further increase risks in what it described as a "dynamic and challenging sourcing environment."
The investment firm emphasized that digital traffic growth is crucial for Target to scale its digital advertising and third-party marketplace fees, which it views as increasingly necessary to offset gross margin pressures and support investments in automation, technology, and AI.
In other recent news, Target Corporation announced its second-quarter earnings for 2025, reporting an adjusted earnings per share (EPS) of $2.05. This figure slightly exceeded the forecasted EPS of $2.04. Additionally, Target’s revenue for the quarter reached $25.21 billion, surpassing expectations by 1.24%. Despite these positive earnings and revenue results, the company faced challenges with a decline in comparable sales and a decrease in gross margins, which raised concerns among investors. These financial results and market conditions contributed to a significant drop in Target’s stock during pre-market trading. The recent developments highlight the mixed performance of the company, with earnings and revenue exceeding projections but operational challenges persisting. Investors and analysts will likely continue to monitor how Target navigates these issues in the coming quarters.
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