On Wednesday, CFRA adjusted its outlook on Target Corporation (NYSE:TGT), reducing the stock price target to $160 from the previous $171. The firm maintained a Hold rating on the retail giant's shares. The decision follows Target's latest financial results, which revealed a slight year-over-year decline in earnings per share (EPS) for the first fiscal quarter ending in April.
Target reported an EPS of $2.03, missing estimates by $0.03 and marking a 1% decrease compared to the same period last year. Comparable sales dropped by 3.7%, aligning with consensus expectations. Despite the lower-than-anticipated second-quarter guidance and ongoing challenges with discretionary consumer spending, Target has not altered its full-year financial outlook.
The retailer is experiencing a downturn in frequent purchase categories such as food and beverages as well as household essentials, attributed to diminishing pricing advantages. Nevertheless, certain departments like beauty, seasonal products, and exclusive offerings continue to perform well.
In response to the current market conditions, Target has initiated price reductions on everyday items to foster more regular customer visits, a strategy that may negatively impact profit margins and delay the company's goal to revert to pre-pandemic operating margins above 6%.
Target has not engaged in share repurchases for nearly two years but indicated the possibility of resuming buyback activities towards the end of 2024. The adjusted stock price target of $160 is based on a 17 times multiple of the projected EPS for the fiscal year ending in January 2025, which has been revised down to $9.44 from $9.52.
Projections for the following fiscal year have been slightly increased to an EPS of $10.52, up from the earlier forecast of $10.40.
InvestingPro Insights
Amidst the adjustments by CFRA, Target Corporation (NYSE:TGT) presents several factors worth considering according to InvestingPro. Notably, Target has demonstrated a strong commitment to shareholder returns, having raised its dividend for 53 consecutive years. This consistent dividend growth, coupled with a low P/E ratio of 16.02, suggests that the company is trading at a reasonable price relative to near-term earnings growth.
Moreover, Target is recognized as a prominent player in the Consumer Staples Distribution & Retail industry and operates with a moderate level of debt, which could be reassuring for investors concerned about financial stability.
InvestingPro data highlights Target's significant market cap of $66.48 billion and a PEG ratio of 0.35, indicating potential for earnings growth compared to its P/E ratio. Moreover, the company's revenue over the last twelve months as of Q4 2024 stands at $107.41 billion, despite a slight decline in revenue growth of -1.57%. For investors seeking value and growth, Target's current dividend yield of 2.82% and its position as a profitable company over the last twelve months could be attractive attributes.
To delve deeper into Target's financials and for more tailored InvestingPro Tips, investors can explore https://www.investing.com/pro/TGT. There are 5 additional tips available to guide investment decisions. Remember to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enhancing your investment research with valuable insights.
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