Target (TGT) is on track to report fiscal fourth-quarter earnings largely in line with expectations, while management may guide conservatively next week, Oppenheimer said on Monday.
The brokerage raised its price target on the stock to $170 from $160, saying the outperform-rated retail chain continues to be a top pick. “Following a more than 40% rally off the October lows, we would be positioned to take advantage of any weakness with a likely conservative guide,” Oppenheimer analysts including Rupesh Parikh and Erica Eiler wrote.
They raised its fourth-quarter earnings per share target to $2.40 — a penny above consensus — from a prior view of $1.90 on a stronger gross margin expansion. Target’s fourth quarter closed at the end of January, with the results due out March 5.
Oppenheimer continues to model for a 5% decline in comparable sales, which is worse than the 4.5% drop market view. Grocery stores sales have softened while general merchandise trends remain subdued, according to Parikh and Eiler.
“We believe challenges in discretionary categories, such as hardlines and apparel, along with adverse weather in certain markets in January could limit the magnitude of comp upside,” the analysts said.
Looking ahead, management could introduce a conservative fiscal 2024 outlook. Oppenheimer said Target’s earnings per share guidance could bracket its $8.75 target, which would imply high single-digit growth. The brokerage is expecting flattish comparable sales for the ongoing year.
While consumer spending appears to be improving, the discretionary backdrop remains mixed, especially for durable products like consumer electronics, the analysts said.
Further ahead, Oppenheimer continues to see a path to a nearly 6% operating margin by fiscal 2025, which would end in January 2026. Target’s management could update intermediate-term operating margin targets at its analyst day scheduled for the same day as the print, the Oppenheimer analysts said.