Target stock downgraded as multiple analyst groups blame execution for profit hit


Analysts say a factor that drove Target Corp.’s broad first-quarter earnings error were the execution errors of the company.

“In our view, the company was unable to run properly in what is becoming a very challenging environment, which has created substantial uncertainty about Target’s prospects,” wrote Truist Securities, which take the rare step of lowering the shares of Target intradia on Wednesday.

Target said Wednesday during its quarterly earnings review that it had too many “volume” items, which led to rebates.

I’ll see: Target stock falls as profits decline in consumer spending and transportation costs rise

“We suspect that due to extended delivery times on product orders and aggressive moves to create stock positions, companies (including Target) are now trying to anticipate demand far beyond what they have historically done,” analysts head. . wrote Scot Ciccarelli.

“Then, when demand doesn’t materialize, they have a much lower risk of reduction than we’ve seen in the past. However, as one of the largest US retailers / importers, we would have expected a much better execution than company has just published, mainly because it continues to work with inventory. “

Truist downgraded Target to maintain the purchase and lowered its target price to $ 171 from $ 261.

Target also downgraded to keep buying at CFRA on Wednesday. The retailer’s target price fell to $ 165 from $ 288.

And the retailer downgraded to keep buying from Stifel, and analysts lowered their target price to $ 185 from $ 270.

“Cost pressures are greater than expected and we believe they are likely to continue at least until the end of 2022, leading to considerable pressure on earnings,” wrote analysts led by Mark Astrachan.

“Weak margin weakness is more pronounced and reflects lower discretionary spending resulting in higher reduction rates and significantly increased inventory levels.”

In addition to inventory issues, Target also said it faces much higher transportation costs than initially expected, and now expects the total to reach $ 1 billion for the year. .

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“Given the expected duration of the inventory and the pain of the load, we consider Target’s profitability issues to be a difficult macro situation exacerbated by execution issues,” Bill Kirk wrote to MKM Partners.

“By comparison, we believe Walmart’s profitability issues are primarily caused by the macro environment, with far fewer execution errors.”

Walmart WMT hurdles include
-2.74%
during its first-quarter earnings report were merchandise delays, a change in consumer spending, and a fire at one of its largest compliance centers.

Consumers are reducing and shifting their spending to experiences such as traveling and moving away from goods.

“Target now has more market share worth defending, but we anticipate a more aggressive response from competitors in 2022, especially as discretionary categories slow down,” MKM said.

MKM rates are neutral on target stocks with a fair value estimate of $ 180, below $ 253.

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BMO Capital Markets says Target is willing to spend to protect this acquired market share, even at higher transportation costs.

“Despite the still strong top-level outlook, it is clear that Target is more focused on maintaining and growing customer traffic (healthy + 3.9%, + 21% in two years) and willing to absorb significantly higher costs ( freight transport is expected to increase ($ 1 billion above the plan), which management clearly believes will pay off over time as it works to maintain significant market share gains in recent years. ” write analysts led by Kelly Bania.

“Target compared this $ 1 billion margin investment in the company in 2017
investment, which eventually paid off, but it could take time. “

BMO Tariffs Target shares exceed $ 210 target price, below $ 250.

Target’s target price also fell to Cowen (up to $ 190 from $ 265, stocks outperform performance); Raymond James (target price reduced to $ 205 from $ 275, strong stock-valued buy); and JPMorgan (up to $ 188 from $ 302, overweight in shares).

Shares of Target closed on Thursday with a fall of 5.1% after ending Wednesday with the biggest one-day settlement since Black Monday, 25%. Shares have fallen 33.7% during the year so far.



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