Target Stock Price Forecast August 2021 – Time to Buy TGT?
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Target stock was trading lower in US premarket trading today after releasing its quarterly earnings. The stock is meanwhile up over 43% for the year and is outperforming the markets by a wide margin even as some of the other retail stocks like Walmart are underperforming.
This week’s calendar is filled with data points related to retail. We got the July retail sales data yesterday that showed sales falling 1.1% which was worse than what analysts were expecting. Then we have a flurry of retail earnings. Home Depot, Walmart, Lowe’s, and Target have already released their earnings while Macy’s earnings are also scheduled for the week.
Retail earnings
The earnings season for retail companies has been good. All the companies that have released earnings posted better than expected earnings. The markets’ reaction has been different though and Home Depot stock tumbled yesterday despite posting record revenues and earnings beats. Home Deport missed the same-store sales estimates which weighed down the stock despite the earnings beat. Also, the tepid retail sales data dampened sentiments towards retail stocks yesterday.
Looking at the price action today, we see something similar. While Lowe’s stock is up sharply, Target is trading down despite posting better than expected earnings. Target’s board also approved a massive $15 billion share buyback program.
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Target second-quarter earnings
Target reported revenues of $25.16 billion in the fiscal second quarter which was ahead of the $25.08 billion that analysts were expecting. Its adjusted EPS of $3.64 was also higher than the $3.49 that analysts were expecting. The company reported higher year-over-year sales across all categories which is an encouraging sign.
“In the second quarter, our business generated continued growth on top of record increases a year ago, reinforcing Target’s leadership position in retail,” said CEO Brian Cornell. The company reported comparable store sales growth rate of 8.7% in the quarter. The company has guided for high single-digit comparable sales growth for the second half of the fiscal year. It expects the operating income margin for the full year to be above 8%.
Guidance looks strong
“Even after unprecedented growth over the last two years, we see much more opportunity ahead of us, and we’re leaning into opportunities to invest in the long-term growth and resiliency of our business,” said Cornell.
Commenting on the guidance, Target CFO Michael Fiddelke said that it “reflects our confidence in Target’s ability to continue putting profitable growth on top of profitable growth — even in a volatile environment.”
Target stock forecast
Target has received a median target price of $258 from the analysts polled by CNN Business which is a premium of only about 1.2% over current prices. Its highest target price of $309 is a premium of almost 20% while the lowest target price of $176 is a 31% discount.
Of the 30 analysts covering the stock, 23 rate TGT as a buy or some equivalent while six analysts have rated it as a hold. Only one analyst has a sell rating on the stock. We could see analysts revise Target’s target price after its earnings release.
Earlier this month, Deutsche Bank and Telsey Advisory Group had boosted Target’s price target to $305 each.
Target stock technical analysis
Currently Target stock is trading above the 50-day, 100-day, and 200-day SMA (simple moving average). However, the stock might test the 50-day SMA in today’s price action. Its been a strong support channel for TGT stock but could be tested today, looking at the pre-market price action. If the stock falls below the 50-day SMA it could head towards the 100-day SMA. The stock has a 14-day RSI (relative strength index) of 46.4 which is a neutral indicator and indicates neither overbought nor oversold positions.
TGT stock valuation
Target stock trades at an NTM (next-12 months) PE multiple of 22.16x. The multiple has averaged 21.5x, and 21x over the last three and five years respectively. While several retail companies are trading way above their long-term valuation multiples, TGT’s current valuation is only slightly above the long-term averages.
Target stock long term forecast
Looking at the long-term picture, the forecast for Target looks positive. The company has been increasing its e-commerce capabilities which will pay off in the long term. Wall Street analysts expect the company’s revenues to rise 9.4% in the current fiscal year. However, the growth is expected to slow down to 2% in the next fiscal year.
The company’s earnings growth is however expected to outpace the topline growth with EBITDA projected to rise 16.2% in this fiscal year. Retail companies incurred higher costs related to COVID-19 in 2020 which took a toll on the earnings. As most of these costs will not be there this year, retail and e-commerce companies are expected to post a surge in earnings.
To sum it up, Target looks like a good retail stock to buy for the long term and the post-earnings weakness could be a good buying opportunity.
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