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Wall Street Weighs In On Target's Q1 Earnings

Target Corporation (NYSE: TGT) reported some impressive first-quarter numbers on Wednesday, but the market response has been lackluster due to concerns over slumping margins.

Benzinga · 05/21/2020 16:35

Target Corporation (NYSE: TGT) reported some impressive first-quarter numbers on Wednesday, but the market response has been lackluster due to concerns over slumping margins.

Target reported adjusted EPS of 59 cents on revenue of $19.62 billion. Both numbers beat consensus analyst estimates of 40 cents and $19.04 billion, respectively. Same-store sales also jumpers 10.8%.

However, the company said expenses related to the pandemic cost the company $500 million in the quarter, and shoppers shied away from certain high-end products.

Several analysts have weighed in on Target stock.

Strong Start To Q2

Bank of America analyst Robert Ohmes said April trends were even more impressive than the first-quarter numbers, including 282% online sales growth and 16% same-store sales growth.

“While store comps (excl. digital) rose just 0.9% in F1Q, they turned meaningfully positive in 2H April driven by a surge in store sales/traffic even as digital sales were growing ~300%,” Ohmes wrote in a note.

Tigress Financial analyst Ivan Feinseth said any post-earnings weakness is a long-term buying opportunity for investors.

“Target will continue to benefit from a combination of online sales with in-store pickup along with its growing expansion of same-day delivery services,” Feinseth wrote.

The New Retail Environment

Raymond James analyst Matthew McClintock said Target’s first-quarter numbers confirm his long-term thesis for the retail sector as a whole.

“In a world of retail ‘winners and losers,’ those who have aggressively invested in omni-channel and supply chain capabilities, and those who have differentiated merchandising with highly relevant brands, have an immense market share opportunity over the next several years,” McClintock wrote.

KeyBanc analyst Edward Yruma said the economic downturn will widen the gap between retailers that are well-positioned for the future and those that aren’t.

“Mix remains a NT headwind (GM down 452 bps), but we think it will actually be a significant tailwind given the likely door closures in the department store/home décor space,” Yruma wrote.

Ratings And Price Targets

  • Bank of America has a Buy rating and $150 target.
  • Raymond James has a Strong Buy rating and $150 target.
  • KeyBanc has an Overweight rating and $140 target.

Target's stock traded around $118.15 per share at time of publication.

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Photo by Mike Kalasnik/Wikimedia.