Target Corporation (TGT) shares experienced a significant surge following the release of the company’s second-quarter financial results, which surpassed analysts’ expectations. The retailer also raised its outlook for the full year 2024, boosting investor confidence.
Target’s adjusted earnings per share (EPS) forecast for the year has been increased to a range of $9.00 to $9.70, up from the previous range of $8.60 to $9.60. This new forecast exceeds the consensus analyst estimate of $9.36.
Analysts covering the retail giant offered their perspectives on the company’s performance. JP Morgan analyst Christopher Horvers maintained a Neutral rating, citing the strong comparable sales figures. He attributed the positive results to lower product costs mitigating expected promotional pressures. Horvers also noted that the forward guidance appeared reasonable, suggesting it was not overly conservative. He estimated a target price of $155, using the higher end of the EPS range and applying a 16x multiple, with a midpoint price of $150.
Goldman Sachs analyst Kate McShane, however, reiterated a Buy rating on Target, with a price forecast of $191. McShane highlighted the company’s quarterly gross margin of 28.9%, exceeding Goldman Sachs’ estimate of 28.2%. The year-over-year increase of +185 basis points was attributed to the net effects of merchandising efforts. Cost improvements outweighed higher markdowns, while a favorable category mix and reduced inventory adjustments contributed positively. Nevertheless, McShane acknowledged that increased digital fulfillment and supply chain expenses compared to the previous year partially offset these gains.
Despite the positive results, McShane identified several potential downside risks. She cautioned that if consumer spending weakens, traffic and sales trends could slow down. Additionally, margins might face pressure from investments in omni-channel capabilities, supply chain improvements, and shifts in product mix.
As a result of the upbeat earnings report, TGT shares climbed by 11.8% to $161.34 at the close of trading on Wednesday.
