Analysts revise stock price target estimates after earnings

Get ready, Halloween fanatics; Lewis returns.

For those who don’t know, Lewis is from Target (TGT) incredibly creepy creation that the big-box retailer unleashed last year to great success.

Related: Analysts revise stock price target objective ahead of earnings

Target president and CEO Brian Cornell said that while Oct. 31 may seem far away, “our consumer research and early season sales suggest there’s a lot of excitement around the holidays this year.”

“Last year, social media was ablaze with videos of our 8-foot-tall Halloween pumpkin ghoul, Lewis,” he told analysts during the company’s second-quarter earnings call. “So we had to bring him back this season along with some new friends, all with their own personalities and catchy catchphrases.”

Halloween is an important day in the retail industry’s calendar because it’s the second biggest shopping holiday in the US after Christmas, with consumers spending an average of about $108 last year to get scared.

Cornell noted that comparable sales, or revenue growth at store locations that have been open for at least a year, rose 2 percent in the quarter, the first increase since the fourth quarter of 2022.

“Among the drivers of our comp sales, we are pleased that our second quarter growth was driven entirely by traffic, reflecting the combined benefits of the multiple guest-focused initiatives we highlighted at our financial community meeting in March” , Cornell said.

The discussion turned to consumers, who Cornell said have shown remarkable resilience in the face of multiple challenges over the past several years, “and remain resilient today.”

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Target CEO: ‘We remain on offense’

“Given the headwinds they’ve faced with inflation over the past few years, consumers continue to focus on value as they work hard to manage their household budgets,” he said.

“And while they continue to shop for the holidays and other seasonal times, many are putting off purchases until the time of need,” added Cornell.

Retail sales data released by the US Census Bureau showed that consumers continued to increase their spending in July, even as economic growth moderated. According to National Retail Federation Chief Economist Jack Kleinhenz, “the mid-summer boost from back-to-school and college spending, along with special days offered by retailers, clearly helped.”

Related: Target Offers Unexpected Retail Sales, Takes on Walmart

“Even as labor force growth cools, consumer spending remains the backbone of the economy and keeps expansion on a positive path,” he said in a statement.

Rick Gomez, recently named Target’s chief merchandising officer, told analysts, “American families continue to deal with a lot.”

“These pressures are clearly weighing on them and they are looking for a refuge from the daily stress they feel,” he said. “And yet, while the economic data remains mixed, we see a consumer who is still willing and able to spend.”

“Yes, there is still an election,” Gomez added, “Yes, they are paying attention to the budget. And yes, look for everyday deals and value. But they’re also willing to shop around when they find the right combination. of fashion and novelty at the right price.”

Target, which announced in May that it would cut prices on 5,000 common items, reported second-quarter earnings of $2.57 a share, up 43 percent from a year ago, while revenue increased by 2.7%, up to 25.45 billion dollars.

The FactSet consensus estimate called for Target to post earnings of $2.18 per share, with revenue totaling $25.177 billion and same-store sales rising 1.1 percent.

“As we look to the future, our team is focused on controlling what we can control,” Cornell said. “We decided to stay on the attack while maintaining a cautious overall outlook, a position that has worked well for us in recent quarters.”

Target is up 10.1% year-to-date and up 22.7% from a year ago.

After reviewing Target’s results, TheStreet Pro’s Bruce Kamich, a technical analyst with 50 years of market tracking, advised traders to “target very carefully.”

“Buying a stock after a price gap opens requires some finesse when it comes to risk,” he wrote in his Aug. 21 column. “I would wait a few days of trading before buying so one can risk below the lows of a few trading days.

Analyst says target results are ‘strong first step’

Analysts adjusted their price targets for the company after the earnings report.

Bank of America Securities analysts Robert Ohmes and Molly Baum raised the company’s price target for Target to $195 from $190 and maintained a buy rating on the stock.

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“The macroeconomic environment remains uncertain and volatile, but we expect a continuation of recent offsetting trends as Target’s enhanced value proposition and merchandise assortment support growth through the important back-to-school/back-to-college season and into the Holidays” , the analysts said in a research note.

Analysts said they expect positive compound sales and continued gross margin expansion to more than offset potential risks, including a weaker or worsening compound sales trend or same-day delivery competition.

Analysts at Deutsche Bank raised their price target to $183 a share, up from $165, and gave the Minneapolis-based company a buy rating.

“Regarding the second quarter results, there was concern that TGT saw a decline in sales trends amid an unstable and weak consumer context,” the firm said. “TGT bucked this with a modest lead in Q2 (same-store sales), with steady trends in June and July likely continuing into August.”

While guidance for the second half was mixed, Deutsche Bank analysts said “we believe it is sufficiently cautious and the outlook leaves room for growth, especially as consumers increasingly respond to novelty and price/value in discretionary categories”.

UBS analyst Michael Lasser raised the company’s price target for Target to $200 from $185 and maintained a buy rating on the stock.

Lasser said he sees Target’s results as an initial but strong first step in restoring the bullishness on the company’s stock.

He added that there’s been a lot more to like than to dislike since launch, highlighted by rapid traffic growth, healthy gross margin gains, accelerating other revenue growth and the return of share buybacks.

Target could build on what started this quarter, and not only could estimates move higher, but the multiple has a good chance of moving to the upper end of its 5-year range, the analyst argued.

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