Scan to Download ios&Android APP


Target (TGT) stock forecast: Profits falling prey to inflation?


Updated

Share this article

Have a confidential tip for our reporters?

Target (TGT) stock forecast: Profits falling prey to inflation? Target Retail Store. Target Sells Home Goods, Clothing and Electronics I
Target (TGT) stock forecast: Profits falling prey to inflation? Photo: Jonathan Weiss / Shutterstock.com

If you live in the US, there’s a 75% chance that you live within 10 miles from a Target (TGT) store. Formerly known as the Dayton Company, the company is based in Minnesota, where the first Target store was established in 1962. With over 1,900 stores, the general merchandise retailer has its footprint in all 50 US states as well as the District of Columbia.

Quick facts about Target

Target offers a range of national and private brands, which it refers to as ‘owned brands’. Its red bull’s eye logo is one of the most recognised corporate brands. 

Corporate logo for Target

On 14 December 2021, Store Brands awarded Target the Retailer of the Year award for 2021. In an interview with Store Brands, Target stated it aspired to differentiate its operations through its owned brand portfolio. 

Following research into its customers’ tastes and preferences, Target launched over 30 store brands uniquely curated for its target market, 10 of which have surpassed sales of $1bn. This growth trajectory resulted in record breaking top-line growth for the company.

However, profitability remains a concern for the retail giant. On 18 May, Target released its financial results for Q1 2022 and reported adjusted earnings per share (EPS) of $2.19, which fell short of the Zacks consensus estimate of $3 and was 40.65% lower than the previous year’s $3.69.

After the results were reported, the TGT stock price fell by nearly 25%. Join us as we find out what lies ahead for the retailer, undertake a Target stock analysis, and get analysts’ insights on the Target future stock price.

Target stock fundamental analysis: Q1 2022

In its Q1 2022 financial result, Target reported total revenue of $25.1bn, beating Zacks analysts’ consensus estimate of $24.5bn. Compared to Q1 2021 revenue of $24.1bn, the top-line for Target increased by 4%.

Marking 20 consecutive quarters of sales growth in Q1 2022, Target reported over 95% of its first quarter sales was supported through its physical stores, with store sales increasing 3.4% YoY. Digital sales were also up by 3.2%, following growth of 50.2% in the previous year.

Compared to 2019, sales of the company grew over 40% or $7.4bn. Out of this, nearly 55% ($4.1bn) was driven through its store sales with the remaining 45% ($3.3bn) being due to its digital platforms.

Target launched its Drive-Up service back in 2018. This offers customers free contactless pickup from a nearby Target outlet, as they can have their online orders brought out to their cars by the store members within minutes of placing the request.

Drive-Up has been marketed as the ultimate shopping and saving sidekick for the customer and was instrumental in driving more than half of Q1’s digital sales.

Sales growth

In its first quarter earnings, Target reported its top-line growth was primarily supported by the frequently-purchased consumer products such as food and beverages, beauty items and household essentials. However, a drastic fall was observed in purchases of home goods and apparels. 

With inflation at a four-decade high, there was a switch in consumer spending as prices continue to outweigh wages. Target’s cost of sales of $18.4bn remained inflated by over 10%, compared to $16.7bn in 2021. The selling, general and administrative expenses stood at $4.7bn for Q1 2022, a 5.6% hike YoY.

Owing to supply chain disruptions, Target’s fuel and freight costs soared in Q1 leading the company to mark down its inventories. Overall, inventories stood at $15bn, 8.5% higher from the previous quarter’s $13.9bn, and 43.11% higher from $10.5bn YoY.

The inflated inventory levels led to inventory impairment costs, which contributed to the overall dip in earnings. Michael Fiddelke, chief financial officer at Target, mentioned that the inventory markdowns were likely to continue into the next quarter as well.

The operating income for the company was reported at $1.3bn, 43.3% lower than the $2.3bn figure from Q1 2021. Commenting on the company’s disappointing earnings, chairman and CEO Brian Cornell said:

“Throughout the quarter, we faced unexpectedly high costs, driven by a number of factors, resulting in profitability that came in well below our expectations, and well below where we expect to operate over time.”

Despite the decreased earnings, Target stock dividends reflected a 32.4% dividend per share increase, partially offset by a decline in the average share count. The company paid $424m in dividends for Q1 2022, compared with $340m the previous year. Additionally, Target signed on to an Accelerated Share Repurchase (ASR) arrangement for up to $2.75bn of its common stock with the final settlement outstanding as of end of Q1 2022.

Targets tests its first net-zero energy store

Target has committed to being a net-zero enterprise by 2040, with its sustainable strategy Target Forward. By 2030, the company aims to source 100% of its electricity from renewable sources. Compared to 2017, Target has managed to reduce 27% of its direct operations’ emissions.

In recent TGT stock news, on 17 March 2022, the company announced the launch of its retrofit Vista California store. Operating on an environmentally friendly store model, this property will generate more renewable energy that it consumes annually, through solar panels and carport canopies.

What is your sentiment on TGT?

141.47
Bullish
or
Bearish
Vote to see Traders sentiment!

Target has applied for a net zero energy certification from the International Living Future Institute, and aspires to transmit the 10% energy surplus generated through the store back to the local power grid.

John Conlin, Senior VP of Target Properties, said:

“We’ve been working for years at Target to shift toward sourcing more renewable energy and further reducing our carbon footprint, and our Vista store’s retrofit is the next step in our sustainability journey and a glimpse of the future we’re working toward.”

Target stock price movements

Target (TGT) five-year stock price chart

On 18 May 2022, following the release of the company's financial results, TGT stock fell by nearly 25%. From its close price of $215.28 on 17 May, the stock dropped to $161.61 the next day, making it TGT’s worst one-day performance in 35 years. The steep fall was reminiscent of the infamous Black Monday of 19 October 1987, when the stock plummeted by 32.96%. 

Drawing comparisons with Walmart’s underwhelming Q1 earnings, Adam Crisafulli, an analyst from Vital Knowledge, said:

“The Target margin shortfall is more dramatic than what Walmart posted on Tuesday and clearly there are some industry wide/macro problems occurring. Food/gas inflation are drawing dollars away from discretionary/general merchandise, forcing aggressive discounting to clear out products.” 

Since the Q1 results were published, Target stock has been on a steady decline. On 20 May 2022 it closed at $155.36. Compared to the close price of $231.11 on 31 December 2021, it’s fallen by 31.72% year-to-date (YTD).

Milan Vaishnav, CMT, MSTA, a consulting technical analyst at Gemstone Equity Research & Advisory Services, shared a technical analysis on Target stock market, noting: 

“The stock has lost close to 30% this week and is presently trading near 153 levels. The most important level to watch for the stock is the 200-week moving average (MA), which is presently at 144.81. It would be crucial to see if the stock takes support at this level, which is one of the most important supports in the near term. Any fresh entry in the stock must have this level acting as a protective stop.”

Target announced on 7 June that it planned to trim down excess inventory by cancelling orders and implementing additional markdowns to products. The retailer also lowered its operating margins guidance for the quarter — it currently anticipates its operating margin rate for Q2 2022 to come in at 2%, which is lower than the outlook it gave less than three weeks ago, when it said that the same figure would total 5.3%.

Target shares fell 2.3% following the news of the inventory clear-out, but the stock has since rebounded slightly.

In a note to Capital.com, Chris Beauchamp, chief market analyst at online trading platform IG, commented that buyers had stepped in to halt the slide on 7 June:

“What threatened to turn into a nasty afternoon for risk assets seems to have been headed off for now by a wave of buying. Target’s warning about rising inventories and the hit to margins seemed to be the spark markets had been looking for to drive a fresh big move lower, but it looks like this bear market rally isn’t rolling over just yet. Insider buying in tech stocks continues at a heavy pace, and this seems to have provided some comfort to the broader market. It is also interesting that equities have weathered the RBA’s increased pace of rate hikes, but with the ECB and US CPI still to come this week the big issues are set to make a return.”

Beauchamp placed the market's reaction in the global context, and continued with a word of caution in light of the upcoming US reporting seasons:

“A cut to the World Bank’s growth forecasts has reminded investors of the broader problems, even as some of the gloomiest predictions are reined in. The immediate earnings impact appears to be priced in, as demonstrated by the rebound following Target’s warning, but this equity bounce could be under serious pressure by August as the next US reporting season gets underway.”

Target future stock price forecast

As of 9 June, 26 analysts’ predictions compiled by TipRanks gave a consensus TGT stock price target for 12 months of $183.23. The stock projection varied from a potential low of $150 to a high of $231. The average price target represented a 16.71% upside change from the trading price of $156.95 on 9 June. Seventeen analysts recommended buying TGT stock and nine maintained a ‘hold’ rating. 

According to the algorithm forecaster Wallet Investor, the Target stock forecast for December 2022 was a potential high of $251.762. For December 2025, the TGT stock prediction was projected to fall within the range of $349.636 to $367.818.

Several brokerage firms and analysts updated their TGT stock price forecasts after the price drop on 18 May. 

JP Morgan (JPM) heavily discounted its price target from $302 to $188, but continued to reiterate its ‘overweight’ rating. Cowen (COWN) also brought down its stock price target, from $265 to $190 and maintained the outperform rating. Barclays (BARC) maintained its overweight rating on Target but cut down its price target to $200 from $280. Goldman Sachs (GS) lowered its price target to $191 from $290, but maintained a buy stance on the stock. Lastly, Wells Fargo (WFC) lowered its price target from $165 to $155 on 7 June while maintaining a 'hold' rating.

When looking for stock forecasts, it’s important to bear in mind that analysts’ forecasts and price targets can be wrong. Analysts’ stance on whether Target stock is a buy, sell or hold is based on making fundamental and technical analyses of the stock’s performance. Past performance is no guarantee of future results. You should do your own research before investing and remember to never invest money you can’t afford to lose.

FAQs

Is TGT stock a good buy?

Target is one of the biggest global retailers in general merchandise. Following Q1 2022 it achieved sales growth for 20 consecutive quarters. However, with rising inflation, earnings have experienced a significant drop. Going forward, the company’s response to effectively bringing down its cost would be critical to its future prospects. Target’s CEO anticipates mid-single digit revenue growth for the year.

Whether TGT stock is a good investment for you or not will depend on your portfolio composition, investment goals and risk profile, among other factors. Different trading strategies will suit different investment goals with short or long-term focus. You should do your own research and never invest what you cannot afford to lose.

Why has the Target stock price been going down?

There has been a 43.30% decrease in the company’s quarterly operating income YoY. Owing to this, the TGT stock price crashed by nearly 25% on 18 May, after Q1 results were announced.

Will Target stock go up or down?

As of 9 June, algorithm-based forecasting service of Wallet Investor predicted the TGT stock price could potentially go up to $251.762 by December 2022. TipRanks set a 12-month price target of $183.23

Note that analysts’ forecasts can be wrong. Forecasts shouldn’t be used as a substitute for your own research. Always conduct your own due diligence before investing. And never invest or trade money you cannot afford to lose.

When will TGT stock split?

Target’s last stock split took place on 20 July 2000 and followed a 2-for-1 ratio.

The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
Capital Com is an execution-only service provider. The material provided on this website is for information purposes only and should not be understood as an investment advice. Any opinion that may be provided on this page does not constitute a recommendation by Capital Com or its agents. We do not make any representations or warranty on the accuracy or completeness of the information that is provided on this page. If you rely on the information on this page then you do so entirely on your own risk.

Still looking for a broker you can trust?


Join the 400.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account

2. Make your first deposit

3. You’re all set. Start trading