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Wall Street analysts have reacted positively following Target ‘s (NYSE:TGT) Investor Day on Tuesday.
Morgan Stanley raised the firm’s price target on TGT shares to $165 from $155, maintaining an Equal-Weight rating. Analysts investors in a research note that the company’s outlook is de-risked.
“We continue to view the ’23 outlook as conservative. A key takeaway from the Meeting was TGT’s emphasis on establishing a conservative, achievable outlook with particular prudence around inventory management,” wrote the analysts. “We think TGT is entering the year in a relatively clean inventory position alongside a cautious view on the discretionary spending outlook.”
However, they acknowledged that there “remains some ambiguity” over the magnitude and drivers of margin recapture, adding that it’s “still unclear” how much of the path back to a 6% EBIT margin is based on pure recapture of recent headwinds versus how much is dependent on new investments, efficiencies, or incremental sales growth.
Citi analysts maintained a Buy rating and $177 price target on the stock, telling investors that Target’s weak guidance and better inventory position “helps de-risk F23.”
“TGT posted a good qtr relative to expectations and importantly, inventory is in better shape than it has been in a while (inventory in discretionary categories -13%). Although F23 guidance was below consensus (and covered a wide range) we believe it is realistic and will set the bar lower (helps to de-risk F23) from which the company could beat,” wrote Citi. “We continue to believe that TGT is a long-term retail winner.”
Telsey Advisory Group has an Outperform rating and a $185 price target on the stock.
Analysts there said: “Target’s investor meeting increased our confidence in the company’s ability to remain relevant to consumers, gain market share, improve the operating margin over time, and generate strong earnings growth.”
The analysts added that, like Walmart (NYSE:WMT), Target is “planning cautiously for 2023, as reflected by its comp guidance of (LSD)-LSD and clean inventory position, with a greater focus on consumables and essentials over discretionary.”
“That said, Target’s margin recovery (improvement) opportunity is significant in 2023 and beyond,” they added.
