On May 22, Bernstein kept an Underperform rating on Target Corp. (NYSE:TGT) and lowered the associated price target to $80 from $82.
The firm slashed the price target after TGT delivered an underwhelming Q1, with comparable sales of -3.8% coming in meaningfully below sell-side estimates of -1.9%. However, the firm pointed out that it was slightly better than market expectations.
A customer shopping for lifestyle and beauty products at a physical store.
The firm said that Target Corp. is struggling with shopper engagement in its stores, which added to its challenging Q1. Bernstein analysts opined that the declines observed in Q1 may continue for the retailer, especially if e-commerce margins continue to be diluted by the less profitable growth of same-day delivery services.
Bernstein has a cautious stance on TGT and pointed out that the company lowered and further widened its 2025 guidance range. It now expects a low-single-digit decline in sales and a GAAP EPS of $8.00 to $10.00.
The firm’s stance is also based on the complicated balance between profit margins and sales growth. Target Corp. has historically been inclined to prioritize top-line growth over margins in difficult times, which could potentially worsen the gap in e-commerce margins.
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