Target Analysts Set Sights On Long-Term Prospects After Retailer Misses The Mark On Earnings

Target Corp TGT missed the mark on earnings, but analysts have their sights set on the longer-term story. 

What Happened: Target shares tanked Wednesday morning after the retailer reported weak earnings results and lowered its outlook. 

"In the latter weeks of the quarter, sales and profit trends softened meaningfully, with guests' shopping behavior increasingly impacted by inflation, rising interest rates and economic uncertainty," said Brian Cornell, chairman and CEO of Target.

Analysts React: Early analyst reactions are centered around the commentary from Cornell. Several firms are maintaining positive longer-term outlooks, but near-term trends could pose challenges for loyal Target investors. 

"We maintain our Neutral rating as we believe TGT’s strong long-term positioning and benefits from simplification/efficiency initiatives could be offset by continued near-term discretionary category risks," BofA analysts wrote in a note to clients following Target's quarterly results.

Short-term risks include prolonged promotional activity from competitors and the need for price increases in long lead-time categories to offset higher costs, BofA said.

The analyst firm noted that other near-term headwinds stem from the broader macro environment, including broad-based inflation, which puts pressure on discretionary spending. Furthermore, BofA highlighted a potential recession in 2023, which could further pressure consumer spending. 

Analysts at Telsey Advisory Group expressed a similar sentiment following Target's third-quarter report. 

"We are disappointed with Target’s 3Q22 results and 4Q22 outlook, although we understand it is largely impacted by the macro trends. Beyond near-term challenges, we continue to believe Target should gain market share," Telsey analysts wrote in a note to clients.

The analyst firm cited price investments, private brands, remodels, small format stores, supply chain enhancements, loyalty programs, the Target+ marketplace and partnerships with top brands as future drivers of growth and share.

Telsey pulled its price target pending the company's conference call. BofA reiterated its Neutral rating and $180 price target. 

See Also: A Bargain-Hunter's Holiday Ahead? Target Results Indicate Shoppers Are Waiting for Sales to Splurge

TGT Price Action: Target has a 52-week high of $254.87 and a 52-week low of $137.16.

The stock was down 12.9% at $155.71 at the time of publication, according to Benzinga Pro.

Photo: courtesy of Target.