TGT Stock Price: Should Target Be Part of Your Portfolio?
One of the largest consumer
staples companies in the world, Target
TGT) has been valued at a market cap of $124 billion,
at the time of writing. Target just reported its Q3 results on
November 17 and lost 4.73% in market value.
Does this pullback offer
investors the chance to purchase a blue-chip stock at a lower
multiple right now?
What impacted Target sales in Q3?
Target’s third-quarter revenue
rose by 12.7% year over year to $25.3 billion while
adjusted earnings per
share rose 8.7% to $3.03.
Comparatively, Wall Street forecast the company to report sales of
$24.8 billion and adjusted earnings per share of $2.83 in
Target confirmed comparable sales
growth was driven entirely by traffic as store comparable sales
rose by 9.7%. Digital comparable sales were up 29% in Q3, following
the 155% growth experienced in the same period in 2020. The company
explained that 95% of Q3 sales were fulfilled by stores which
indicates it derived 5% of revenue from the online
Target’s CEO and Chairman, Brian
Cornell stated, “Following comp growth of nearly 21 percent a year
ago, our third quarter comp increase of 12.7 percent was driven
entirely by traffic, and reflects continued strength in our store
sales, same-day digital fulfillment services and double-digit
growth in all five of our core merchandising categories. With a
strong inventory position heading into the peak of the holiday
season, our team and our business are ready to serve our guests and
poised to deliver continued, strong growth, through the holiday
season and beyond.”
In Q4 of 2021, Target expects
high-single to low-double digit growth in comparable sales lower
than the previous guidance where it expected a high-single digital
increase. The company also expects full-year operating income
margin rate of over 8% in 2021.
Target stock price has significant upside
Target increased its guidance for
Q4 as the company is experiencing higher demand as consumers are
shopping ahead of schedule due to supply chain issues impacting
Its robust forecast showcases
Target’s strong inventory position and increased consumer spending
in the near-term.
The only reason for the decline
in Target stock price on Nov. 17 was the higher wages and expenses
it incurred to maintain operational efficiency. Until now Target
has managed to pass these costs to consumers enabling it to
preserve profit margins. But, the company warned several investors
have raised prices due to higher inflation numbers.
According to Stifel analyst Mark
Astrachan, Target reported mixed results in Q3. But the results are
solid despite a 260 basis point decline in gross margins. In
addition, Astrachan noted that Target’s comps continue to
outpace Walmart (NYSE: WMT),
and the 2-year sales stack has been consistent with the first half
of 2022 levels. Stifel has a Buy rating on Target with a price
forecast of $280.
Baird analyst Peter
also remains optimistic about
Target as the company’s
actions to secure inventory has helped it gain market share.
Target’s top-line momentum is solid and shareholder returns are
forecast to accelerate in the future. Baird has an Outperform
rating on Target with a price estimate of $285 on the
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