Capstone Holding Corp. lowers convertible note conversion price to $1.00
On Wednesday, Citi issued a downgrade for Target Corporation (NYSE:TGT), changing its rating from "Buy" to "Neutral" and significantly reducing its price target from $188.00 to $130.00. The decision follows Target's third-quarter performance, which Citi analysts found disappointing, coupled with a lackluster forecast for the fourth quarter.
Citi's analysis suggests that Target may be losing market share to Walmart (NYSE:WMT), especially as Walmart has reported gains among higher-income consumers—a demographic that Target may now be at risk of losing further. This concern was previously raised in Citi's September 27, 2024, report titled "Retail Weekend Reading - The Broad Implications of WMT Winning."
The firm believes that Target may have to increase promotional efforts to drive traffic and sales, leading to a more uncertain fiscal year 2025. This is particularly concerning as Target did not demonstrate the ability to adjust its selling, general, and administrative expenses (SG&A) to compensate for the weakness in sales and gross margin (GM) during the third quarter.
Despite Target's shares trading down to approximately $128 in pre-market activity, Citi views the risk/reward for the stock as more balanced at this time. This assessment reflects the challenges Target faces in the competitive retail landscape and the potential need for more aggressive marketing strategies to regain momentum.
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