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Target stock at its lowest price in 3 years after boycott; More pain ahead?

Target stock at its lowest price in 3 years after boycott; More pain ahead?
Kliment Dukovski

Target Corp (NYSE: TGT) had a great start to the year, returning over 20% in January alone. This quickly turned, however, and the stock price has now underperformed the S&P 500 with a loss of 16% year-to-date. 

What’s wrong with Target?

Target is a huge retailer that operates over 1,900 stores in the US and generates over $100 billion in sales. The company has been profitable for nine years over the past 10 years, with Earnings Per Share (EPS) of $7.28 in the past 12 months. It has increased its dividend for 51 consecutive years, making it a dividend king. Also, it has bought back 29% of its shares over the last 10 years.

Yet the stock price doesn’t reflect that. The company’s main issue last year was the supply chain. Now, Target has higher in-stock levels and managed to lower its transportation costs, which is increasing margins. New problems appeared this year, however.

Target beat estimates in its Q1 and Q2 reports, but investors were worried about the soft guidance for the year. The softness was mostly attributed to expectations for increased retail theft, whose impact is estimated to be over $500 million.

Another reason for Target’s negative stock price impact recently was the boycott over pride-themed displays, which lowered the company’s quarterly sales. Target said its sales fell 5.4% in Q2, compared to the same quarter last year.

Adding to the fear is the fact that Cornell Brian, the CEO of Target, sold 30,000 shares worth $3.9 million on August 18.

Insider trading. Source: finviz.com

Despite that, analysts are optimistic

Analyst consensus on TipRanks sees an 18% gain in the next 12 months based on 29 analyst ratings. Almost half of the analysts have a ‘hold’ rating on the stock, however.

TipRanks analyst consensus for the TGT stock. Source: Interactive Brokers Fundamentals Explorer

Kate McShane, a Goldman Sachs analyst, recently said “Sales trends sequentially improved after the boycott-related decline mid-quarter, but the comp still exited at -5% in July and is tracking slightly better for QTD (vs -3% in May and -7% in June).”

Goldman Sachs reiterated its ‘Buy’ rating on Target with a 12-month price target of $168.

If analyst consensus is something to go by, we could see Target’s stock price recover within the next 12 months.

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