On Thursday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Target Corporation (NYSE:TGT), reducing the stock's price target from $209 to $190, while still recommending a Buy rating. This adjustment comes in the wake of Target's first-quarter earnings report, which failed to meet the anticipated earnings per share (EPS).
The retailer reported an EPS of $2.03, falling short of the expected $2.20 or more. The shortfall was attributed to higher-than-anticipated selling, general, and administrative (SG&A) expenses, partly due to costs associated with the relaunch of Target Circle.
Despite the earnings miss, Target's same-store sales (SSS) for the first quarter were generally in line with expectations, even amid a challenging retail environment and adverse weather conditions.
The company's two-year traffic and ticket metrics remained consistent sequentially. Deutsche Bank noted that Target's inventory management continues to be effective, with improved in-stock positions, and the company's efforts to introduce new merchandise and value through price reductions on numerous everyday items are expected to support a rebound in second-quarter comparable sales.
Looking ahead, while the bullish forecast for 2024 of an EPS exceeding $10.50 may be less probable, Deutsche Bank believes that a 6% or higher earnings before interest and taxes (EBIT) margin is still achievable by 2025. Additionally, the possibility of share buybacks resuming later in the year was highlighted as a positive factor for the stock.
InvestingPro Insights
Target Corporation (NYSE:TGT) continues to be an intriguing option for investors, particularly when considering the long-term commitment to shareholder returns, as evidenced by its track record of raising dividends for 53 consecutive years. This commitment is a testament to the company's financial stability and investor-friendly policies. Additionally, the current RSI (Relative Strength Index) suggests that the stock is in oversold territory, which could signal a potential buying opportunity for investors seeking to capitalize on short-term market movements.
InvestingPro Data shows that Target's market capitalization stands at $66.28 billion, with a P/E ratio (adjusted for the last twelve months as of Q1 2025) of 15.74, indicating a potentially attractive valuation in light of its near-term earnings growth. Furthermore, the PEG ratio of 0.32 suggests that the stock may be undervalued relative to its earnings growth prospects. Despite recent challenges, analysts remain optimistic about the company's profitability for the year, supported by a solid gross profit margin of 27.97% for the last twelve months as of Q1 2025.
For investors interested in further analysis and additional InvestingPro Tips, including insights into Target's debt levels, earnings projections, and return performance, visit https://www.investing.com/pro/TGT. There are 11 additional InvestingPro Tips available to help refine your investment strategy. Don't forget to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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