J.P. Morgan Reiterates a Hold Rating on Target

By Ryan Adsit

In a report released today, Christopher Horvers from J.P. Morgan reiterated a Hold rating on Target (NYSE: TGT), with a price target of $79. The company’s shares opened today at $76.18.

Horvers said:

“TGT’s impressive 25% EPS beat vs. consensus in 3Q16 was driven by: (1) expected upside to SSS at -0.2% vs. guidance flat to -2% and the Street at -1%; (2) much better than expected ~80 bps of GM leverage (vs. JPMe +20 bps) on pharmacy and mix benefit; and (3) 40 bps SG&A leverage (vs. JPMe flat) from cost savings. Management raised guidance for 4Q comp to -1% to 1% vs. Street at -0.8% (expecting SSS to be ‘similar to 3Q’) with EPS of $1.55-$1.75 (vs. our prior $1.65 and Street at $1.60). Strong expense management (both in COGS and SG&A) and the low-margin pharmacy sale (JPMe ~60 bps GM tailwind in FY16) have insulated the bottom line given FY16 EPS guide is now back up near the original estimate from the Analyst Day in March, despite a much smaller SSS of roughly flat vs. the initial guidance of 1.5%-2.5%. GM could be conservative (again) in 4Q. Though we suspect that some of the 3Q GM upside related to better markdown support and thus won’t repeat, TGT’s clean inventories (down 3% YOY) combined with similar inventory states in the department store channel suggest the flat GM guide for 4Q is conservative (despite 40 bps less of pharmacy tailwinds sequentially).”

According to TipRanks.com, Horvers is a 4-star analyst with an average return of 7.0% and a 65.1% success rate. Horvers covers the Services sector, focusing on stocks such as Dick’s Sporting Goods, Genuine Parts Company, and Container Store Group.

Currently, the analyst consensus on Target is Hold and the average price target is $79.20, representing a 4.0% upside.

In a report issued on November 9, Jefferies also reiterated a Hold rating on the stock with a $72 price target.

Based on Target’s latest earnings report for the quarter ending October 31, the company posted quarterly revenue of $16.44 billion and quarterly net profit of $608 million. In comparison, last year the company earned revenue of $17.61 billion and had a net profit of $549 million.

Based on the recent corporate insider activity of 65 insiders, corporate insider sentiment is negative on the stock. Most recently, in May 2016, Calvin Darden, a Director at TGT sold 37,105 shares for a total of $2,486,777.

Target Corp. engages in owning and operating of general merchandise stores. It also operates SuperTarget stores with a line of food and general merchandise items and offers an assortment of general merchandise, including many items found in the company’s stores and a complementary assortment, such as extended sizes and colors, sold only online. The company was founded by George Draper Dayton in 1902 and is headquartered in Minneapolis, MN.