Target Shares Hit All-Time High After Earnings Beat Estimates

Target Corp shares scaled its fresh all-time high on Wednesday after the Minneapolis, Minnesota-based retailer reported better-than-expected earnings and revenue in the first quarter.

One of the largest North American retailers that offer customers both everyday essentials and fashionables said its first-quarter adjusted earnings per share rose 525% higher year-on-year to $3.69, beating the Wall Street consensus estimates of $2.26 per share.

The mass-market retail company said its comparable sales grew 22.9% in the first quarter, reflecting comparable store sales growth of 18% and comparable digital sales growth of 50%. Total revenue of $24.2 billion grew 23.4% compared with last year, driven by total sales growth of 23.3% and a 30.4% increase in other revenue. That was higher than the market expectations of $21.51 billion.

For the second quarter of 2021, the company forecasts mid-to-high single-digit growth in comparable sales. The company expects its second-quarter operating margin rate will be well above the second quarter 2019 rate of 7.2%, but likely not as high as last year’s unprecedented 10%.

The Company expects positive single-digit comparable sales growth in the last two quarters of the year and expects its full-year operating margin rate will be well above the 2020 rate of 7.0%, with the potential to reach 8% or somewhat higher.

Following the upbeat results, Target Corp stock rose over 5% to $217.47 on Wednesday.

Analyst Comments

“Target’s (TGT) EPS of $3.69 handily beat Cowen and Street on comps +22.9%and EBIT margin reaching 9.8%. E-comm +50% on top of +141% & stores fulfilled more than 95% of sales. Raised FY21 outlook suggests TGT well-positioned to comp-the-comp. In Cowen’s view: TGT’s connected consumer & delivery innovation + proprietary product mix that resonates + stores & services = winning formula,” noted Oliver Chen, equity analyst at Cowen.

Target Corp Stock Price Forecast

Twenty analysts who offered stock ratings for Target Corp in the last three months forecast the average price in 12 months of $217.58 with a high forecast of $260.00 and a low forecast of $170.00.

The average price target represents a 0.22% increase from the last price of $217.10. Of those 20 analysts, 16 rated “Buy”, four rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the stock price forecast of $205 with a high of $260 under a bull scenario and $145 under the worst-case scenario. The firm gave an “Equal-weight” rating on the mass-market retail company’s stock.

“Major beat & major raise. Most confident guidance raise in our coverage as Target Corp (TGT) epitomizes ‘comping the comp.’ 2021 estimates could move to $12-$13, 2022 EPS power key,” noted Simeon Gutman, equity analyst at Morgan Stanley.

“We expect the stock to move meaningfully higher on these results. We suspect 2021 market expectations for EPS power could land in the $12-$13 range on 8% EBIT margins. This implies TGT is trading closer to 16x versus the current ~22x NTM multiple. 16x seems low relative to TGT’s peer set of high-quality Retail leaders.”

Several other analysts have also updated their stock outlook. Target had its stock price forecast lifted by stock analysts at Telsey Advisory Group to $235 from $215. The brokerage presently has an “outperform” rating on the retailer’s stock.

Moreover, Deutsche Bank raised the target price to $225 from $213. Jefferies upped the target price to $210 from $188. JP Morgan increased the target price to $233 from $230. UBS lifted the target price to $210 from $185.

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