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© Reuters. Oppenheimer initiates Target (TGT) at Overweight
By Michael Elkins
Target (NYSE:) is up 0.15% in pre-market trading on Tuesday after Oppenheimer initiated coverage of the retailer with an Overweight rating and $190.00 price target. Oppenheimer’s base case modeling scenario for TGT assumes a rebound in earnings to $10.40 by FY24 from an estimated $5.45 in FY22. This is primarily driven by outsized gross margin expansion off a depressed base.
Looking forward, analysts see the potential for a strong multi-year profit recovery. Over the long term, they believe the company is well positioned to continue capturing share, driven by digital efforts, store investments, merchandising success on the exclusive brand front, competitor liquidations over time, partnerships with other brands/retailers, and traction with grocery efforts.
Nearer term, the analysts would expect bumps along the way as seemingly aggressive Street forecasts for FY23 and headwinds in certain discretionary categories muddle TGT’s prospects for at least the next few quarters. For Q4 Oppenheimer is looking for EPS of $1.32 vs. a $1.39 Street figure. A forecast that implies earnings are down more than 50% YoY and embeds a 2% comp decline.
They wrote in a note, “Target is one of the world’s largest retailers based out of Minneapolis, MN. The company operates more than 1,900 stores in the United States and offers credit through branded proprietary credit cards. Longer term, we believe the company is well positioned to continue capturing share, driven by digital efforts, store investments, merchandising success on the exclusive brand front, competitor liquidations over time, and partnerships with other brands/retailers. As we look forward, we see the potential for a strong multi-year profit recovery, driven by gross margin expansion, management cost actions, and share gains.”
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