Analysts Highlight Target's Market Share Struggles And Increased Competition: Details

Yesterday, Target Corp TGT reported its first-quarter FY24 earnings and the following are the comments on the same by different analysts.

BMO Capital – Reiterates Market Perform, lowers price target from $170.00 to $155.00

Analyst Kelly Bania said that while Target’s first-quarter results were in line with her expectations, investor expectations for continued GM% upside were clearly reigned in.

With signs of share losses widening in food & consumables, continued weakness in digital growth and signs of increasing same-day competition from Amazon.com Inc AMZN and Walmart Inc WMT, the analyst lowered the price target to $155.

The analyst believes 6% EBIT margins remain the target, but the pace of achieving the target could take longer than expected.

Related: Target Blames ‘Strain On Consumer Wallet’ For Tough Quarter

RBC Capital Markets – Reiterated Outperform, lowers price target from $191.00 to $181.00

Analyst Steven Shemesh opined that with the majority of the easy gross margin wins in the rearview, the focus will shift back to demand trends /market share, for which visibility is fairly limited. 

Consumer response to recent price cuts will be of particular importance, noted the analyst.

The analyst now estimates FY’24/FY’25 comp sales of +0.4%/+2.4% (+0.6%/ +3.3% prior) and EPS $9.50/$10.63 ($9.46/$10.60 prior).

Roth MKM – Reiterates Neutral, price target of $153.00

Physical comparable store sales have not improved with the passage of time (1Q’24 -4.8% y/y vs. 2Q’23 – 4.3% y/y), and the discretionary weakness/value seeking behavior and increased competition make growth uncertain, said the analyst.

For the holiday season and into FY’24, Target lost share against growing competitors, noted the analyst.

The analyst still sees headwinds from heavy overlap with Walmart should value-seeking increase, an aging store fleet and negative skew to regional population growth.

Though Target has an opportunity to monetize a growing, captive digital audience, digital sales are flat, said the analyst.

The analyst noted that profitability continues to improve y/y, but remains below pre-COVID levels, and the return to positive comp sales/ market share gains is uncertain.

Truist Securities – Reiterates Hold, lowers price target from $160.00 to $153.00

Analyst Scot Ciccarelli said the comp guide of 0%-2% for both the second quarter and the year is the company’s worst 2-year performance since the Great Recession, even as competitors continue to grow, suggesting notable share losses.

While the softer sales in many discretionary categories are working against the company, since this is in such contrast to competitors, such as Amazon and Walmart, it clearly signifies market share losses, according to the analyst.

The recent price cuts on high frequency items and the eventual add-back of inventory create additional margin risk, noted the analyst.

Although the stock seems inexpensive at current levels, the absence of momentum and additional earnings risk lead the analyst to stay on the sidelines.

The analyst lowered’ 24/’25 EPS estimates to $9.30/$10.45 from $9.40/$10.60.

Target stock has lost 2% in the last 12 months. Investors can gain exposure to the stock via Consumer Staples Select Sector SPDR Fund XLP and Vanguard Consumer Staples ETF VDC.

Also See: Target’s Sales Decline And EPS Miss: Why Analysts Remain Optimistic

Price Action: TGT shares are trading higher by 0.45% at $143.92 at the last check Thursday.

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