UPDATE: Bank of America Downgrades Target on Secular Risks
In a report published Friday, Bank of America analyst Robert F. Ohmes downgraded the rating on Target Corporation (NYSE: TGT) from Neutral to Underperform, and lowered the price target from $70.00 to $60.00.
In the report, Bank of America noted, “We are lowering our rating to Underperform (from Neutral) on Target. While we believe Target's two traffic driving initiatives (P-Fresh & 5%-off RedCard Rewards) have been successful, we see secular risks to TGT's sales and profit margin outlook given: (1) underlying “core” comps (excl. benefits from traffic initiatives) remain very weak and TGT's current traffic trends remain disappointing considering the significant “RedCard” traffic tailwind; (2) the comp benefits from the P-Fresh remodel program (in over 80% of U.S. stores now) is anniversarying; (3) a recovery/return of TGT's core ($61k income) customer is showing no signs of materializing, potentially due in part to competition from AMZN; and (4) tight inventory levels and conservative merchandising to mitigate PFresh/RedCard gross margin pressure also continues to restrain comps. Our PO of $60 (cut from $70) is based on 13x our F2015E adjusted (excluding Canada losses) EPS of $4.60 (cut from $5.35) and now assumes the U.S. EBIT margin will remain under pressure and Canada will not contribute a profit until F2017 at the earliest.”
Target closed on Thursday at $64.19.
Latest Ratings for TGT
|Apr 2015||Bank of America||Upgrades||Neutral||Buy|
|Mar 2015||JP Morgan||Maintains||Neutral|
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