Case Study: Target (TGT) stock according to high performing analysts
Key Points
Performance
Target shares fell by -3.45% this week, pushing their year-to-date gains down to just 0.36%. This compares poorly to the S&P 500, which is up by 9.62% on a year-to-date basis.
Event & Impact
Target posted its first quarter results this week, beating consensus estimates on both the top and bottom lines. During Q1, TGT’s revenue totaled $25.32 billion, beating Wall Street’s consensus estimate by $40 million. Target’s Q1 non-GAAP earnings per share came in at $2.05, which was $0.29/share above consensus estimates.
Noteworthy News:
Target beat expectations during Q1; however, management provided disappointing guidance for the current quarter. Also, Target noted that organized crime and wide scale theft remain major issues, representing roughly $500 million in profit losses during the first quarter.
Nobias Insights
62% of recent articles published by credible authors focused on Target shares offer a “bullish” bias. Three out of the six credible Wall Street analysts who cover TGT believe that shares are likely to rise in value. The average price target being applied to Target by these credible analysts is $180.33, implying upside potential of approximately 18.4% relative to the current share price of $152.28.
Bullish Take An analyst report from 4-star rated Greg Melich stated, “Evercore ISI analyst Greg Melich raised the firm's price target on Target to $170 from $165 and keeps an In Line rating on the shares, arguing that the company's "beat and keep" Q1 report included "something for everyone."
Bearish Take Nobias 4-star rated author, Aishwarya Venugopal, stated, “Target Corp on Wednesday forecast a grim second quarter as the retailer struggles with consumers shunning non-essentials such as electronics and home goods in the face of persistently high prices, but maintained its full-year profit expectations.”
TGT May 2023
Target (TGT) was one of several big-box retail stores to announce first quarter earnings this week. TGT shares dropped by 3.45% this week after the market digested its results. This negative week pushed Target’s year-to-date gains down to just 0.36%. The S&P 500 is up by 9.62% on the year, meaning that Target shares have underperformed.
Coming into the quarter, investors were fearful of the negative impact that a slowing economy might have on retailers. Thus far during the first quarter earnings season, there has been mixed results coming out of the retail space. However, Target managed to beat Wall Street’s expectations on both the top and bottom lines during Q1, leading credible authors and analysts to signal that the stock’s recent dip represents a buying opportunity.
Bullish Nobias Credible Analysts’ Opinions:
SGB Media, a Nobias 4-star rated author, covered Target’s Q1 results in this week, providing readers with notable highlights from the quarter:
Target sales grew 0.5 percent, reflecting flat comparable sales combined with the benefit of sales from new stores;
Strength in frequency businesses (Beauty, Food & Beverage and Household Essentials) offset continued softness in discretionary categories;
At the end of Q1, inventory was 16 percent lower than in 2022, reflecting more than a 25 percent reduction in discretionary categories, partially offset by inventory investments to support rapidly-growing frequency categories and strategic investments to support long-term market-share opportunities;
First quarter GAAP and Adjusted EPS of $2.05 and operating margin rate of 5.2 percent were ahead of expectations, reflecting a higher gross margin rate than last year.
Marianne Wilson, a Nobias 4-star rated author, analyzed Target’s first quarter results in an article published at Chain Store Age this week. Looking at the quarter from a high level, Wilson said, “Target Corp.’s first-quarter earnings and sales were better than expected even as consumers focused on necessities over discretionary items and shopped more in-store than online.”
Breaking down the company’s fundamentals, Wilson wrote, “Target’s net income fell to $950 million, or $2.05 a share, for the quarter ended April 29, from $1.01 billion, or $2.16 a share, in the year-ago period. Adjusted earnings per share fell to $2.05 from $2.19, but easily topped analysts’ estimates of $1.77.”
Looking at the company’s top-line, Wilson added, “Total revenue edged up 0.6% to $25.32 billion, above estimates of $25.26 billion, with sales growth of 0.5%. Traffic rose 0.9%.”“Total comparable sales were flat last year. Same-store sales grew 0.7%, also better than expected,” she said. Wilson continued, “Comparable digital sales declined by 3.4%. Same-day services saw mid-single digit growth, led by high-single digit growth in drive-up. Target said strength in beauty, food & beverage and household essentials offset continued softness in discretionary categories.”
Lastly, she touched upon the company’s ongoing expansion, writing, “During the quarter, the retailer opened six of the 20 new stores it plans to open in 2023. It also began work on more than half of the approximate 175 stores scheduled to undergo full remodels and other enhancements this year.”
Bearish Nobias Credible Analysts Opinions:
Nobias 4-star rated author, Aishwarya Venugopal co-authored a report with Ananya Mariam Rajesh at MSN.com this week, which put a spotlight on Target’s poor forward looking growth outlook. She wrote, “Target Corp on Wednesday forecast a grim second quarter as the retailer struggles with consumers shunning non-essentials such as electronics and home goods in the face of persistently high prices, but maintained its full-year profit expectations.”
Venugopal quoted Target’s senior executive, Christina Hennington, who touched upon macro concerns during the company’s post-earnings analyst call. Hennington said, "American consumers continue to face difficult trade-off decisions as they juggle the wants and needs of their families ... The fear of a looming recession weighs heavily on many American families.”
Venugopal noted, “Target executives used the word "cautious" at least 13 times during the hour-long earnings call.” She also put a spotlight on an ongoing headwind that TGT continues to deal with: crime. “Target also warned theft and organized crime could reduce this year's profitability by more than $500 million, compared to 2022 when inventory shrink was over the $650 million expected,” she said.
Overall, Venugopal stated, “Target projected adjusted profit between $1.30 and $1.70 per share, below estimates of $1.93 for the current quarter and forecast comparable sales to decline in the low-single digits.”
Nobias Credible Analysts
This below-consensus forecast factored into the stock’s negative performance this week. After looking over the Q1 results, several credible analysts tracked by the Nobias algorithm updated their opinions on TGT shares.
According to The Fly on the Wall, “Evercore ISI analyst Greg Melich raised the firm's price target on Target to $170 from $165 and keeps an In Line rating on the shares, arguing that the company's "beat and keep" Q1 report included "something for everyone." Bulls liked the comp traffic, gross margin beat and improving inventory, bears "will obsess" with comps rolling over and the Q2 "talkdown" and the firm finds itself "in the middle," the analyst tells investors. While "still impressed" with Target's traffic, share, and comps, it "seems there is no magic recovery" for gross margins or EBIT margin, the analyst added.” Melich is a Nobias 4-star rated analyst.
The Fly on the Wall wrote, “Truist lowered the firm's price target on Target to $157 from $160 and keeps a Hold rating on the shares. The company's Q1 sales and earnings were modestly above expectations, supporting the view that the management's guidance was "overly conservative", though sales also deteriorated and turned negative at the end of the quarter, the analyst tells investors in a research note. Given Target's underwhelming performance over the last few quarters, along with incremental sales softness and potentially greater mix and margin pressures, it's tough to get excited about the stock at current levels, Truist added.” Truist’s retail analyst is Scot Ciccarelli, who carries a Nobias 4-star rating.
Nicholas Ward is a Senior Investment Analyst at Wide Moat Research. He has spent the last 8 years writing about the stock market at various publications, including Seeking Alpha, The Street, Forbes Real Estate Investor, Sure Dividend, The Dividend Kings, iREIT, Safe High Yield, and The Intelligent Dividend Investor.
Lastly, Michael Baker of DA Davidson, who is a Nobias 5-star rated author, updated his price target as well. According to the Fly on the Wall, “DA Davidson lowered the firm's price target on Target to $193 from $200 but keeps a Buy rating on the shares. Near term sales softness offsets the Q1 earnings beat and puts the pressure on a back half recovery, but the positives outweigh the negatives, the analyst tells investors in a research note. The firm adds that while Target was one of the more highly visible examples of the inventory glut that plagued retailers last year, the benefits of being "cleaner" were notable in its Q1 report.”
Overall bias of Nobias Credible Analysts and Bloggers:
According to the majority of credible authors and analysts that Nobias tracks, Amgen’s recent dip represents a buying opportunity. 78% of recent articles published by credible authors have expressed a “Bullish” bias towards AMGN shares.
Currently two out of the three credible Wall Street analysts who have provided opinions on AMGN shares believe that they’re likely to increase in value.
The average price target being applied to Amgen by these credible analysts is $255.67. Amgen shares trade for $223.42 at the moment, meaning that the credible analyst average price target implies upside potential of approximately 14.4%.
Disclosure: Nicholas Ward has no TGT position. Nicholas Ward wrote this article for Nobias at their request with the intention of giving investors a balanced perspective based on the writings of Nobias highly rated analysts and bloggers. Nobias has no business relationship with any company whose stock is mentioned in this article and does not have a position in this stock.
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Disclaimer: The Nobias star rating is based on past performance results and is not an indicator of future results. These past performance returns do not represent returns that any investor actually earned. Assumptions made include the ability to purchase the stocks recommended by the author under liquid markets where the transaction would be at the market price for the day. In reality, loss in liquidity may have a material impact on the returns that actually may have been earned. Further, returns are calculated without any including transaction costs, management fees, performance fees or expenses, or reinvestment of dividends and other income. This information is provided for illustrative purposes only.