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Target's upside limited by headwinds; stock price target lowered by BMO

Published 23-05-2024, 06:10 pm

On Thursday, BMO Capital Markets adjusted its outlook on Target Corporation (NYSE:TGT), reducing the price target to $155 from the previous $170 while keeping a Market Perform rating on the stock. The adjustment comes as the retailer's first-quarter results met the analyst's projections, but did not surpass investor expectations for gross margin percentage growth.

Target's recent performance has been affected by a variety of challenges, including broader market competition and internal issues. According to BMO Capital, Target is experiencing an expansion of market share losses in the food and consumables sector. The company is also facing headwinds due to a slowdown in digital sales growth and heightened same-day delivery competition from industry giants such as Amazon (NASDAQ:AMZN) and Walmart (NYSE:WMT).

The firm's analyst believes that while Target continues to aim for a 6% EBIT margin, the timeline for achieving this financial target may be extended. This outlook suggests a more cautious view of the speed of Target's profitability improvements. Despite these concerns, the analyst suggests that the stock's current valuation is fair when considering these factors.

The report concludes with a sense that Target's journey to reach its financial goals may require more time than initially anticipated, with the current market conditions and competitive landscape taken into account.

InvestingPro Insights

As Target Corporation navigates a complex retail environment, InvestingPro provides a nuanced perspective on the company's financial health and market position. With a market capitalization of $66.28 billion and a P/E ratio that has adjusted to 15.74 in the last twelve months as of Q1 2023, Target is trading at a valuation that reflects its earnings potential. Notably, the company's dividend yield stands at 3.07%, a testament to its commitment to shareholder returns, having raised its dividend for 53 consecutive years—a significant streak that underscores its financial stability.

InvestingPro Tips highlight that Target's stock is currently in oversold territory according to the RSI, and it has experienced a substantial drop over the last week. This could present a buying opportunity for investors looking for entry points into a prominent player in the Consumer Staples Distribution & Retail industry. Moreover, analysts predict that Target will remain profitable this year, which is corroborated by a profitable performance over the last twelve months. For those considering an investment in Target, there are additional insights available on InvestingPro, with a total of 11 more InvestingPro Tips that can be accessed for deeper analysis. To help make the most informed decisions, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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