Target (TGT) shares dropped sharply on Wednesday after the retailer posted weaker-than-expected Q3 earnings and offered a disappointing outlook for the holiday quarter. The company’s profit miss was tied to high inventory levels, which weighed heavily on margins, despite improvements in shrink rates and fulfillment costs. Unsurprisingly, analysts were not enthused by these results, as they pointed to troubling trends in sales and market share.
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Indeed, Stifel’s Mark Astrachan highlighted that comparable sales continued to weaken on both a year-over-year and two-year basis, which suggests that Target is underperforming competitors and losing market share in key categories. This has led to negative impacts on the firm’s gross margins.
In addition, RBC’s Steven Shemesh observed that if sales stay weak in 2025, Target has limited options to improve margins. Nevertheless, on a little bit of a more positive note, he estimated that if sales and margins stay flat next year, the company could still yield $9.50 in EPS, which suggests a valuation of between $140 and $145 per share.
Target May Need Deeper Discounts to Drive Traffic
However, despite RBC’s valuation, Citi analyst Paul Lejuez warned that Target’s uninspiring Q4 outlook indicates that it is likely losing ground to Walmart (WMT). This may force Target to offer deeper discounts in order to drive traffic, which could create uncertainty for results in 2025.
Meanwhile, Morgan Stanley highlighted the dominance of major players like Amazon (AMZN), Walmart, and Costco (COST), which now capture over 50% of incremental retail sales and 75% of e-commerce growth. Although Target has outpaced many smaller retailers in sales growth, it lags behind these giants in market share and stock performance. This growing divide is adding pressure to Target shares as investors think it may struggle to stay competitive.
What Is the Future of TGT Stock?
Overall, analysts have a Moderate Buy consensus rating on TGT stock based on 17 Buys and 10 Holds. Over the past year, shares have declined by more than 4%, and the average TGT price target of $182.52 per share implies an upside potential of 49.47% from current levels. Of the aforementioned analysts, Paul Lejuez has so far been the most accurate on TGT stock, with a 50% success rate. He currently has a Hold rating with a $130 price target.
