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On Wednesday, Truist Securities adjusted its financial outlook for Target Corporation (NYSE:TGT), increasing the retailer’s price target from $82.00 to $90.00 while sustaining a Hold rating on the stock. According to InvestingPro analysis, Target appears undervalued compared to its Fair Value, with the stock trading at an attractive P/E ratio of 10.5x despite its $42.6 billion market capitalization. The firm’s analyst, Scot Ciccarelli, provided insights into Target’s recent performance, noting that the first quarter results were weaker than consensus expectations but aligned with Truist’s own projections, which were notably below the average estimates. Target reported a comparable sales decline of 3.8% and earnings per share (EPS) of $1.30, close to Truist’s estimates of a 3.5% decline and $1.29 EPS. This performance comes against the backdrop of Target’s substantial annual revenue of $106.57 billion, though InvestingPro data shows 15 analysts have recently revised their earnings expectations downward for the upcoming period.
Ciccarelli highlighted that while general discretionary sales are struggling, Target is facing additional challenges due to self-inflicted issues such as inventory management swings, diversity, equity, and inclusion (DEI) changes, and marketing strategies. These internal factors, combined with external pressures from competitors like Walmart (NYSE:WMT), which holds a Buy rating, are seen as contributing to the negative sales momentum at Target.
The analyst expressed concern over the potential need for Target to increase its price investments and the possibility of facing greater impacts from tariffs than management has indicated. These factors could pose further risks to the company’s earnings. Despite these concerns, the revised price target to $90 is supported by what Truist refers to as one-time shrink benefits, which are adjustments made to account for the loss of inventory due to factors like theft or damage.
This price target adjustment is indicative of Truist Securities’ cautious stance on Target’s stock, suggesting that while there may be some positive aspects supporting the current valuation, there are significant challenges that could affect the company’s financial performance in the near term. Nevertheless, InvestingPro highlights Target’s impressive 54-year streak of consecutive dividend increases, demonstrating strong financial resilience. For deeper insights into Target’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Target Corporation reported its Q1 2025 earnings, which fell short of expectations, with adjusted earnings per share (EPS) at $1.30, missing the forecast of $1.65. The company’s revenue was $23.85 billion, below the anticipated $24.35 billion. This performance marked a deviation from previous quarters where Target had met or exceeded forecasts. Evercore ISI maintained its In Line rating on Target with a price target of $100, citing a 3.8% decrease in comparable sales and a gross margin decline of 70 basis points year-over-year. Jefferies adjusted Target’s stock price target to $120 from $130, while maintaining a Buy rating, reflecting mixed factors such as strong digital growth but weak in-store traffic.
William Blair maintained an Outperform rating on Target, highlighting the company’s effective execution amid market challenges. Target’s digital sales grew by 4.7% year-over-year, with same-day services surging by 35%, although the Beauty category remained stagnant. The company continues to face competitive pressure from rivals like Walmart and Costco (NASDAQ:COST), which are capturing significant growth in U.S. retail sales. Target’s management is focused on strategic initiatives to address these challenges, including mitigating tariff impacts and enhancing product offerings. Despite the current headwinds, Target remains committed to its full-year EPS guidance between $7 and $9, anticipating a low single-digit sales decline for the remainder of the year.
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