Debate on Target ramps up with downgrades and upgrades flying in

Joe Raedle

There was mixed reaction to Target's (NYSE:TGT) earnings report on Wall Street on Thursday.

BMO Capital Markets turned cautious with a downgrade to Market Perform from Outperform on concerns over inventory levels.

Analyst Kelly Bania: "While we continue to expect TGT’s EBIT margin to rebound to 6%+ following depressed levels in 2022, we believe the stock is likely fairly priced and already reflects a rebound margin (we forecast nearly 90% earnings rebound next year), but we are less certain regarding the magnitude of sales to attach to this EBIT margin given TGT’s market share gain trends."

The firm slashed its price target on TGT to $165.

Deutsche Bank downgraded Target (TGT) to a Hold rating from Buy. "The softness in comp performance comes despite elevated promotional activity 4QTD, as consumers are increasingly gravitating towards deep discounts and value, which makes the margin recovery story harder to defend, in our view," warned analyst Krisztine Katai. The firm said it was no longer confident in modeling +$12 EPS for TGT next year.

A Target (TGT) bull on the Street was spotted after Piper Sandler upgraded the retailer to Overweight from Neutral. TGT was said to have had a difficult 2022, but Piper thinks it is approaching trough EBIT margins and believes at 0.8X 2023 EV/Sales valuation looks compelling. Piper assiged a price target of $190.

Elsewhere on Wall Street, Credit Suisse lowered its price target to $165 and KeyBanc Capital Markets dropped its PT to $180. Morgan Stanley reduced its PT to $155 with no catalysts seen for Q4 and low visibility on the gross margin recapture.

Shares of Target (TGT) fell 0.33% in premarket action to $154.97 after shedding 13.14% on Wednesday.

Read why Seeking Alpha author Geoff Considine thinks Target looks oversold.