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Target (TGT - Free Report) stock was a pandemic and post-covid superstar. Target, like many others, failed to adapt to quickly changing consumer shopping patterns that caused it to suffer a rough 2022, full of inventory issues, lagging sales, and more.
Target’s earnings outlook has continued to plummet for FY22, FY23, and FY24, with TGT shares tumbling alongside its fading EPS estimates.
Although Target’s long-term outlook like remains intact, now might not be the best time to dive back into TGT, especially with the U.S. economy in the midst of a downturn.
Not Pandemic Shoppers Anymore
Investors first hammered Target stock after its Q1 FY22 earnings release for TGT’s inability to navigate rising freight costs and more. Alongside its bottom-line miss, Wall Street also hated Target’s initial decision to absorb higher costs instead of passing them on to consumers. Walmart (WMT - Free Report) got hit hard for a similar report at the time.
Target got stuck dealing with inventory issues because the firm simply had too much of the wrong stuff on hand. Consumers spent well over a year buying all of the furniture, appliances, TVs, and other big-ticket items that they needed.
Target was forced to discount items and take other measures to offload its access inventory. Fast forward to TGT’s third quarter release in November, and Wall Street got more bad news. TGT lowered its guidance once again as consumers continued to pull back on spending.
Image Source: Zacks Investment Research
Target is continuing to offer discounts in an effort to attract shoppers to discretionary items. “We know they are spending more dollars on food and beverage and household essentials, and as they are shopping for discretionary categories they are looking for promotions,” CEO Brian Cornell said on TGT’s Q3 earnings call.
The inflationary crunch on shoppers is hitting Target harder than rival Walmart because TGT’s business is made up more heavily of these discretionary items that people have cut out of their budgets.
TGT’s consensus earnings estimate for FY22 is down 32% since its Q3 release alone and way more since the start of 2022. Plus, its outlook for fiscal 2023 is now 21% lower, with FY24 trending heavily in the wrong direction as well.
Bottom Line
Target’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. And Zacks estimates call for its adjusted earnings to fall 59% YoY in fiscal 2022 and then come in well below its FY21 levels in fiscal 2023. And its most recent EPS estimates are coming in beneath the current consensus.
Target has also missed our adjusted earnings estimates by an average of 33% in the trailing three quarters. TGT is the Bear of the Day given its near-term outlook and the continued unknowns ahead on the consumer spending and inflation fronts.
Target does remain a possible long-term play given its overall standing and strength within a key segment of the consumer-driven U.S. economy. And Target stock is down about 40% from its highs. But TGT just surged off oversold RSI levels a few weeks ago and some investors might want to wait for a slightly better entry point.
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Bear of the Day: Target (TGT)
Target (TGT - Free Report) stock was a pandemic and post-covid superstar. Target, like many others, failed to adapt to quickly changing consumer shopping patterns that caused it to suffer a rough 2022, full of inventory issues, lagging sales, and more.
Target’s earnings outlook has continued to plummet for FY22, FY23, and FY24, with TGT shares tumbling alongside its fading EPS estimates.
Although Target’s long-term outlook like remains intact, now might not be the best time to dive back into TGT, especially with the U.S. economy in the midst of a downturn.
Not Pandemic Shoppers Anymore
Investors first hammered Target stock after its Q1 FY22 earnings release for TGT’s inability to navigate rising freight costs and more. Alongside its bottom-line miss, Wall Street also hated Target’s initial decision to absorb higher costs instead of passing them on to consumers. Walmart (WMT - Free Report) got hit hard for a similar report at the time.
Target got stuck dealing with inventory issues because the firm simply had too much of the wrong stuff on hand. Consumers spent well over a year buying all of the furniture, appliances, TVs, and other big-ticket items that they needed.
Target was forced to discount items and take other measures to offload its access inventory. Fast forward to TGT’s third quarter release in November, and Wall Street got more bad news. TGT lowered its guidance once again as consumers continued to pull back on spending.
Image Source: Zacks Investment Research
Target is continuing to offer discounts in an effort to attract shoppers to discretionary items. “We know they are spending more dollars on food and beverage and household essentials, and as they are shopping for discretionary categories they are looking for promotions,” CEO Brian Cornell said on TGT’s Q3 earnings call.
The inflationary crunch on shoppers is hitting Target harder than rival Walmart because TGT’s business is made up more heavily of these discretionary items that people have cut out of their budgets.
TGT’s consensus earnings estimate for FY22 is down 32% since its Q3 release alone and way more since the start of 2022. Plus, its outlook for fiscal 2023 is now 21% lower, with FY24 trending heavily in the wrong direction as well.
Bottom Line
Target’s downward earnings revisions help it land a Zacks Rank #5 (Strong Sell) right now. And Zacks estimates call for its adjusted earnings to fall 59% YoY in fiscal 2022 and then come in well below its FY21 levels in fiscal 2023. And its most recent EPS estimates are coming in beneath the current consensus.
Target has also missed our adjusted earnings estimates by an average of 33% in the trailing three quarters. TGT is the Bear of the Day given its near-term outlook and the continued unknowns ahead on the consumer spending and inflation fronts.
Target does remain a possible long-term play given its overall standing and strength within a key segment of the consumer-driven U.S. economy. And Target stock is down about 40% from its highs. But TGT just surged off oversold RSI levels a few weeks ago and some investors might want to wait for a slightly better entry point.