Target’s ‘Pivot to Growth’ Coming as It Moves Past Recent Issues, Says D.A. Davidson

By James Rogers

Target’s stock soared following the company’s fourth-quarter results Tuesday

Target Corp. is well positioned for growth in its second-quarter as the retail giant gets past the challenges of recent years, such as the 2023 controversy over Pride-themed products, according to analyst firm D.A. Davidson.

The discount retailer’s shares soared following the company’s fourth-quarter results to end Tuesday’s session up 12%. The stock is up 3.3% Wednesday.

“For all the enthusiasm around TGT’s 4Q23 results, sales are still down year over year and are expected to be again in 1Q24,” wrote D.A. Davidson analyst Michael Baker, in a note released Tuesday. “But, the pivot to growth is coming, most likely in 2Q24 as TGT cycles the start of the worst of the negative comps a year ago, in part due to the Pride issue.”

Target (TGT) pulled Pride-themed products from some stores in the run up to June 2023’s Pride Month after intense anti-LGBTQ backlash.

“The theme of moving past the issues of the last few years, including the inventory glut, inflation related crowding out and other missteps should continue to lead to a recovery in operating margins back the pre-pandemic range,” Baker added. “Improving traffic trends help.” D.A. Davidson reiterated its buy rating and increased its price target to $195 from $167 for Target.

The discount retailer reported better-than-expected profit in its fourth-quarter results Tuesday, with margins boosted by lower markdowns and lower shrink costs.

“With Q1 and FY’24 guidance relatively in line with expectations, we are encouraged by the co.’s progress regarding inventory management, shrink reduction, and in-store and supply chain efficiencies,” wrote Jefferies analyst Corey Tarlowe, in a note released Tuesday.

Target’s long-term opportunity also remains attractive, according to the analyst firm. “TGT has a clean inventory position and is continuing to lap temporary margin headwinds, which could result in margin recapture opportunities,” wrote Tarlowe. “Therefore, with margin tailwinds ahead, and valuation attractive relative to peers, we reiterate our buy rating.” Jefferies raised its Target price target to $195 from $170.

Truist Securities reiterated its hold rating for Target but raised its price target to $160 from $142. “Overall, we believe sales momentum is still being adversely impacted by prior marketing/merchandising execution issues, along with broader softness in discretionary goods,” wrote Truist analyst Scott Ciccarelli, in note released Tuesday. “We expect trends to remain soft in 1Q, in-line with guidance for a comp decline of (3.0% – 5.0%), before inflecting positively in 2Q-4Q.”

Speaking during a conference call to discuss the fourth-quarter results, Target’s Chief Growth Officer Christina Hennington said that consumer outlook remains mixed, but added that the company has seen a sequential uptick in discretionary-category performance over the last two quarters.

Of 31 analysts surveyed by FactSet, 18 have an overweight or buy rating, and 13 have a hold rating for Target.

Target’s stock has risen 30.7% in the last three months, outpacing the S&P 500 index’s SPX gain of 12.3%.

Scroll to Top