Target Corporation (TGT:NYE) is set to release its fourth-quarter financial results on February 28th, and analysts are expecting a mixed bag. While the retailer has a history of outperforming sales forecasts, ongoing pressures on consumer discretionary spending due to high inflation and interest rates may weigh down its top line. Nonetheless, Target’s diverse portfolio may provide some relief.
In the past 12 months, TGT stock has exceeded analysts’ sales forecasts 75% of the time, outpacing the industry average of 65.75%. For Q4, Wall Street is anticipating sales of $30.67 billion, a slight dip from the $31 billion reported in the same period last year.
During the Q3 conference call, Target noted that consumers were showing signs of financial stress, resulting in reduced discretionary spending. This could negatively impact categories such as apparel and home, leading to lower margins in the short term. However, analysts such as Robert Drbul of Guggenheim remain bullish on Target, citing the retailer’s brand strength and customer loyalty.
While Target’s top line may remain subdued, pressure on margins from higher markdowns and shrinkage could impact its bottom line. Target has missed analysts’ earnings forecasts in the past three consecutive quarters, and for Q4, analysts are expecting earnings of $1.40 per share, down from $3.19 in the previous year’s quarter.
Despite analysts’ mixed outlook, TGT stock has a Buy consensus rating with an average price target of $181.33, implying an 8.61% upside potential. However, hedge funds sold 82.9K shares of TGT last quarter, indicating a level of caution.
Looking ahead, Target’s focus on strengthening its next-day delivery capabilities and multi-category product offerings bode well for future growth. Additionally, the convenience of omnichannel shopping and the retailer’s value proposition remains strong positives. While short-term headwinds may limit the upside potential of TGT stock, Target’s long-term prospects are promising.