JPMorgan raises Target stock price target to $109 from $105

On Thursday, JPMorgan analyst Christopher Horvers adjusted the price target for Target Corporation (NYSE:TGT) shares, increasing it to $109.00 from the previous target of $105.00, while maintaining a Neutral rating on the stock. According to InvestingPro analysis, Target appears undervalued at its current trading price of $93.01, with the stock having declined nearly 30% year-to-date. The company maintains a modest P/E ratio of 10.8x, suggesting potential value opportunity. Horvers noted that Target’s first-quarter comparable sales decreased by 3.8%, which was at the lower end of forecasts. Earnings per share also fell to $1.30 compared to $2.03 in the previous year, with this figure including an approximate $0.50 shrink recapture.

Target’s core merchandise margins were estimated to have decreased by 125 basis points, and inventory levels were reported to be up by 11% year-over-year. The company has plans to enter the second quarter with a clean slate, driven by increased markdowns and order cancellations. Despite these challenges, InvestingPro data shows Target maintains strong fundamentals with $106.57 billion in revenue and healthy free cash flow yield of 11%. For deeper insights into Target’s financial health and valuation metrics, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro. Horvers highlighted that Target has lost market share in several categories, including household essentials and grocery, which are crucial for driving traffic and are key components of the retailer’s product mix.

The analyst pointed out that Target’s wider earnings per share range of $7.00 to $9.00 for the rest of the year aims to mitigate risks amidst significant economic uncertainty. Prior to the first-quarter results, JPMorgan had reduced their earnings per share estimate to $7.37, with bearish estimates averaging around $6.75. Despite the current challenges, Target anticipates that the pressures on merchandising and supply chain will be resolved. The company suggested that its GAAP earnings per share outlook of $8.00 to $10.00 is a more accurate reflection of its core profitability, indicating an operating margin of approximately 5%.

Looking ahead, Horvers expressed the belief that Target remains a significant retailer but emphasized the need for an improved economic environment to bolster goods purchasing. He also conveyed an interest in understanding how the upcoming CEO succession will unfold and its potential impact on Target’s performance in consumables. Notably, InvestingPro highlights Target’s impressive 54-year streak of consecutive dividend increases, demonstrating long-term financial stability. InvestingPro subscribers have access to 8 additional key insights about Target’s future prospects and financial health metrics.

In other recent news, Target Corporation has faced a series of analyst downgrades and price target reductions due to concerns over its financial performance and market conditions. BofA Securities downgraded Target’s stock from Buy to Neutral and slashed the price target from $145 to $105, citing persistent sales weakness and delayed recovery in comparable sales. Telsey Advisory Group also downgraded Target from Outperform to Market Perform, lowering the price target to $110, following a disappointing first-quarter performance with an adjusted earnings per share (EPS) of $1.30, which missed expectations.

CFRA revised its 12-month price target for Target to $99 from $100, maintaining a Hold rating, and noted underwhelming first-quarter results with a 3.8% drop in comparable sales. DA Davidson reduced its price target for Target to $125 from $140, while keeping a Buy rating, highlighting concerns over margin guidance despite some positive performance aspects. BMO Capital Markets adjusted its price target to $95, retaining a Market Perform rating, and pointed out challenges with declining sales and inventory misalignment.

Target has also revised its full-year EPS guidance downward to a range of $7.00 to $9.00, from the previous $8.80 to $9.80, as noted by CFRA. Analysts have emphasized the importance of pricing strategies and potential macroeconomic developments, such as trade deals, which could impact Target’s future performance. The series of downgrades and target reductions reflect a cautious outlook on Target’s near-term financial prospects amidst various operational challenges.

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