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On Wednesday, RBC Capital Markets adjusted its outlook on Target Corporation (NYSE:TGT), reducing the retailer’s price target slightly from $153.00 to $151.00, while still maintaining an Outperform rating on the stock. The adjustment comes as February sales began sluggishly and the potential impact of tariffs looms over consumers, who are already under strain. Currently trading at $117.14, with a P/E ratio of 13.6x and a dividend yield of 3.82%, InvestingPro analysis suggests Target is trading below its Fair Value.
The firm’s analyst pointed out the importance of margin management in the current retail climate. Despite the challenges, the analyst believes that the risks to margins are already accounted for in the stock’s current trading price, which is approximately 13 times RBC’s revised 2025 earnings per share (EPS) estimate of $8.90. This figure is around 4% below the midpoint of Target’s EPS guidance. With eight analysts recently revising earnings downward, subscribers to InvestingPro can access comprehensive analysis and additional insights through exclusive Pro Research Reports.
RBC Capital Markets sees a positive skew in the risk-to-reward ratio for Target shares but acknowledges the lack of immediate catalysts that could drive the stock price. However, the long-term business outlook for Target is viewed more favorably following a recent financial community meeting.
Looking ahead, RBC Capital has updated its projections for Target’s future performance. For the fiscal years 2025 and 2026, the firm now expects net sales growth of 1.5% and 3.5%, respectively, adjusted from the previous forecasts of 2.3% and 3.5%. Comparable sales are anticipated to grow by 0.3% in 2025 and 2.5% in 2026, which is a downward revision from the earlier 1.3% and 2.5% estimates. The adjusted EPS forecast remains $8.90 for 2025 but has been slightly lowered for 2026, from $10.18 to $10.09.
The new price target of $151 is based on an estimated 15 times the revised 2026 adjusted EPS of $10.09, as per RBC Capital’s analysis. This price adjustment reflects a modest change in the investment firm’s outlook, taking into account the current economic pressures and Target’s ability to manage its margins amidst these challenges.
In other recent news, Target Corporation’s earnings and revenue have been under scrutiny following its recent financial disclosures. The company reported a modest 1.5% increase in comparable sales for the fourth quarter, but concerns remain over a slower start to the first quarter and competitive pressures. Analysts from Truist Securities, Bernstein, and Piper Sandler have adjusted their price targets for Target, each setting it at $124 while maintaining either a Hold or Market Perform rating. BMO Capital Markets also maintained its Market Perform rating with a price target of $120, citing uncertainties such as tariffs and a lack of long-term guidance as factors contributing to a cautious outlook.
Target’s strategic efforts include enhancing customer engagement through digital capabilities and supply chain improvements, as well as focusing on its core brand promise of "Expect More, Pay Less." However, these initiatives face challenges from increased competitive pressures, particularly from rivals like Walmart (NYSE:WMT), which has shown significant growth. JPMorgan noted Target’s focus on differentiating the customer experience and expanding its marketplace, although the firm also lowered its price target from $146 to $140.
Overall, analysts have expressed concerns about Target’s ability to simultaneously increase sales and profitability, highlighting potential risks such as tariffs and consumer spending declines. Despite these challenges, Target remains committed to strategic investments aimed at improving its operational metrics and customer engagement. The company’s efforts to innovate and uphold strong retail fundamentals continue to be closely monitored by market watchers.
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