Target (TGT) is scheduled to report its fourth-quarter earnings on Tuesday, with analysts anticipating a substantial upside for the retailer’s stock despite expected declines in sales and profit compared to the same period last year.
Target’s earnings report: Analysts expect stock upside despite declines
Analysts project Target will report revenue of $30.77 billion for the quarter and adjusted earnings per share of $2.26, reflecting declines of 3.6% and 24%, respectively, from the previous year’s figures. However, they expect comparable store sales to increase by 1.39% year-over-year, a consensus figure influenced by Target’s earlier sales projection adjustment in January.
The analysis of Target’s stock shows a split in ratings, with five “buy” and seven “hold” ratings among brokers tracked by Visible Alpha. The average price target is just under $144, indicating around 15% upside from Monday’s intraday price of $124.24. Analysts from JPMorgan, Oppenheimer, and Morgan Stanley noted that Target may take a conservative approach regarding its first-quarter and 2025 projections, similar to other retailers such as Walmart and Home Depot.
Despite concerns regarding tariffs and inflation on discretionary spending, Oppenheimer analysts stated they “continue to believe shares have bottomed” and suggested utilizing any volatility following the earnings report. They highlighted that Target shares have experienced notable fluctuations after past earnings releases.
Furthermore, the issue of CEO succession is coming to the forefront as CEO Brian Cornell recently marked 10 years in his position. While JPMorgan analysts reported in September 2022 that Cornell intended to remain for an additional three years, they believe an internal candidate is the most likely successor.
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Over the past year, Target shares have decreased nearly 18% in value. The upcoming earnings report will reveal if the retailer has managed to boost full-price sales of its primary discretionary merchandise. Analysts note that Target’s previous decisions to maintain profit guidance indicated reliance on deals and discounts, putting pressure on its profit margins.
Target has struggled in attracting consumers to discretionary items amid persistent inflation and high interest rates, along with intense competition from online discounters and Walmart. In November, Target reduced its profit guidance following a significant earnings miss, attributing some difficulties to the costs associated with a temporary port strike and primarily to weaker sales of discretionary items, typically associated with higher margins.
The company has identified new merchandise as a potential driver for sales momentum. Recently introduced products, such as colorful leggings and redesigned bras from its intimates line, have attracted customer spending. Chief Commercial Officer Rick Gomez noted positive customer reactions to these offerings, asserting that “when we have newness with style, on trend, at affordable prices, the consumer is willing to shop.”
Target is also planning to enhance its sales strategies through new partnerships. In February, the retailer announced collaborations with Champion and Warby Parker, which will see exclusive sportswear lines and eyewear products available both in-store and online. Despite the announcement, these partnerships are expected to launch officially in the second half of 2025, indicating a longer-term strategy to refresh merchandise and attract new customers.
Disclaimer: The information provided in this article is for informational purposes only and should not be considered financial or investment advice. Please consult with a qualified financial advisor before making any investment decisions.
Featured image credit: Target
