Market Overview

UPDATE: Bank of America Downgrades Target on Secular Risks

Share:
Related TGT
Dan Nathan's Target Trade
Retail's Last Hope: Store Credit Card Profits?
OPEC Meeting, Ulta Beauty, Best Buy, Momo Lead Investing Action Plan (Investor's Business Daily)

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

DateFirmActionFromTo
May 2017Gordon HaskettInitiates Coverage OnSell
Mar 2017Telsey Advisory GroupDowngradesOutperformMarket Perform
Feb 2017SusquehannaInitiates Coverage OnNeutral

View More Analyst Ratings for TGT
View the Latest Analyst Ratings

Posted-In: Bank of America Robert F. OhmesAnalyst Color Downgrades Analyst Ratings

 

Related Articles (TGT)

View Comments and Join the Discussion!