Target Posts Q3 Earnings Miss: Analysts Slash Forecasts On Market Share Loss, Margin Concerns

Shares of Target Corp (NYSE:TGT) recovered slightly in early trading on Thursday, after tanking on the company's third-quarter earnings miss.

• JPMorgan analyst Christopher Horvers maintained a Neutral rating, while slashing the price target from $167 to $139.
• Goldman Sachs analyst Kate McShane reiterated a Buy rating, while reducing the price target from $192 to $164.
• Piper Sandler analyst Alexia Morgan reaffirmed a Neutral rating, while cutting the price target from $156 to $130.
• KeyBanc Capital Markets analyst Bradley Thomas maintained a Sector Weight rating on the stock.

Check out other analyst stock ratings.

JPMorgan: Target's third-quarter comps of 0.3% came significantly below the consensus of 1.4%, "as weather, continued weakness in discretionary categories, and some share loss continue to weigh on discretionary spend," Horvers said in a note. Markdowns and promotions represented "the lion's share" of the company's third-quarter gross margin miss and is "the big driver of the implied drop in 4Q gross margins," he added.

"We believe TGT continues to face share issues of varying degrees across all categories, sans beauty, but the trend appears to be improving," the analyst wrote. The stock got battered after the earnings release and is likely to bounce bank, he further stated.

Goldman Sachs: Target's disappointing comps were due to a decline in ticket size, with consumers continuing to spend cautiously, "most notably in discretionary categories," McShane said. The company's beauty segment bucked the trend and delivered comps of more than 6%, while food & beverage and essentials delivered low single-digit growth, she added.

Target's gross margin contracted by around 20 basis points to 27.2% and came in below consensus, the analyst stated. "We would note this was the most significant change for the quarter as 2Q gross margins were up ~190 bps," she further wrote.

Piper Sandler: "While part of the Q3 miss can be attributed to transitory factors surrounding supply chain costs and discretionary sales weakness (apparel, home, etc.), results also suggest some ongoing share loss," Morgan wrote in a note. The company's gross margin came in at 27.2%, significantly short of consensus of 28.5%, she added.

Target's performance hinges on a recovery in discretionary consumer spending and, once this happens, the company's fundamentals are likely to improve, the analyst stated. "However, we now have increased concerns with tariff dynamics and how they could impact supply chain and sourcing costs in 2025 – particularly considering today’s margin miss was partly from navigating port strikes," she further wrote.

KeyBanc Capital Markets: Target's third-quarter results missed expectations due to "slower sales and unexpected margin pressure," Thomas said. Lower ticket sizes weighed on comps, which came well below expectations, he added.

Given the disappointing third-quarter performance and soft expectations for the fourth quarter, management lowered their 2024 guidance for comps and earnings below consensus, the analyst stated. "Looking ahead, we see consumer headwinds, competitive pressures, and moderating margin opportunities as potentially limiting upside for shares," he further wrote.

Price Action: Shares of Target had declined by 0.62% to $122.51 at the time of publication on Thursday.

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