Target Analysts React To Q4 Earnings, Investor Day Presentation

Target Corporation TGT reported fourth-quarter results Tuesday morning, followed up with an investor day presentation. Here is a summary of how some of the Street's top analysts reacted to management's discussion and presentation.

The Target Analyst

Stifel analyst Mark Astrachan maintains a Hold rating on Target's stock with a price target lowered from $130 to $125.

Bank of America analyst Robert Ohmes maintains at Buy, $150 price target.

UBS analyst Michael Lasser maintains at Neutral, price target lowered from $127 to $115.

KeyBanc Capital Markets analyst Edward Yruma mainatins at Overweight, $140 price target.

See Also: Retail Analyst Breaks Down Target's Report, Makes The Case For Costco And Walmart Stock

No Margin Growth

Astrachan said the earnings report and analyst day presentation were "solid" and confirms ongoing market share can be expected from investments in the physical and online store, personnel and assortments. Sales, EBIT and EPS growth for 2020 were guided in line with management's long-term algorithm, while gross margins are likely to be flat after a 50 basis point expansion in 2019.

Reasons To Buy Target's Stock

Ohme said there are a few reasons to buy Target's stock. These include:

• Management commentary that it feels "very good" about the start of the quarter suggests potential upside to the research firm's 2.5% same-store sales growth estimate.
• Target's brand remains "top-of-mind" as consumers look to seek out same-day e-commerce options.
• Around 40% of total sales come from Food/Beverage and Household Essentials, which bodes well as consumers look to stock-up some items amid coronavirus concerns.
• Management's outlook of $3.5 billion in capex or less for the next two years and $3 billion afterward makes the case for higher average levels of free cash flow and improving return on invested capital in the future.

Coronavirus 'Complicates' Guide

Lasser said Target's management presented a credible game-plan to support same-store sales in 2020 even if it doesn't see similar market share gains it did in 2019. During a "normalized year" this shouldn't necessarily be an issue, but the coronavirus situation "remains fluid" and "complicates" management's outlook.

In fact, management's already conservative 2020 guidance "largely excludes" potential coronavirus headwinds, including supply chain disruptions, the analyst wrote in the note.

Credit For Finding Opportunities

Yruma said Target deserves credit for seeking out and finding new opportunities to spur growth. Management discussed its new even-smaller 6,000 square feet store format that can stand out in "high-visibility" locations (Las Vegas, Disney) that are also profitable.

Management also reaffirmed the case for operating income growth to come in at a mid-single-digit and EPS growth at a high-single-digit as the company leverages it's omnichannel and merchandising strength.

TGT Price Action

Target's stock traded around $107 per share at time of publication.

Photo by Mike Kalasnik/Wikimedia.