4 Target Analysts Explore Latest Earnings Beat, 2024 Growth Strategy, Potential Share Buyback

Target Corp TGT shares are trading higher after the company reported a beat on EPS and revenue estimates.

The Minneapolis-based company reported fourth-quarter 2023 revenue growth of 1.7% year-on-year to $31.92 billion, beating the analyst consensus estimate of $31.83 billion.

Here’s what analysts have to say about the retailer:

• JPMorgan analyst Christopher Horvers, CFA has a Neutral rating on the stock with a price target of $160.
• Goldman Sachs analyst Kate McShane, CFA has a Buy rating on the stock with a 12-month price target of $176.
• BofA Securities analyst Robert F. Ohmes, CFA reiterated Buy with a price target of $$160 on Target stock.
• Telsey analyst Joseph Feldman has an Outperform rating on Target stock with a price target of $160.

Related: Why Is Target Stock Trading Higher Today?

JPMorgan: Horvers pointed out the key drivers of success, including lower markdowns, reduced freight costs, and a favorable product mix. He noted that despite a -4.4% comp sales figure, it exceeded projections, and the gross margin increased to 25.6%. While acknowledging SG&A deleveraging due to wage investments and inflationary pressures, Horvers highlighted the 5.8% 4Q operating margin, surpassing expectations.

Looking ahead, Target “is aiming to roll out new innovations as part of their profitable growth strategy to reignite sales and drive traffic and market share gains in 2024,” said Horvers.

Goldman Sachs: McShane anticipates an upward trajectory for the stock following 4Q beat and robust FY24 guidance. She sees support for potential long-term operating margin recovery to 6% or higher. McShane is interested in gaining insights regarding the cadence of same-store sales in 4Q, quarter-to-date trends by category, and the impact of gross margin drivers, including markdowns, mix, and shrink.

Additionally, she seeks information on the company’s perspective on inflation, details about its inventory position, and its promotional outlook. Identified downside risks include decelerating traffic and sales trends, inflationary pressures, intensified price competition, and potential margin pressure from omni-channel initiatives and supply chain investments.

BofA Securities on Target: Ohmes sees the earnings beat to be driven by improvements in comparable traffic and profitability. The EPS beat was fueled by stronger-than-expected comparable sales, gross margin, and expense reduction. Gross margin outperformance was attributed to reduced markdowns, lower freight and supply chain costs, favorable product mix, and other factors.

Looking ahead to 2024, Ohmes notes Target’s earnings guidance of $8.60-9.60, slightly below their estimate, but he remains optimistic about future gross margin expansion, efficiency initiatives, and sequential traffic improvements.

“A potential return to share repurchase could also support earnings into 2024,” noted Ohmes.

Telsey: Feldman notes that while the guidance for the first quarter of 2024 could have been more robust, it met modest expectations and is likely to be conservative, particularly if there’s a rebound in discretionary spending. Target can gain market share through various strategic initiatives, including price investments, private brands, store remodels, supply chain enhancements, loyalty programs, and collaborations with brands like Ulta Beauty, he said.

“Target also has an opportunity to show a multiyear profitability recovery that should fuel significant earnings growth,” said Feldman.

TGT Price Action: Target stock was trading at $167.81 at the time of publication.

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