Target (NYSE: TGT) is gearing up to unveil its fiscal second-quarter results on Wednesday, August 21. Investors are abuzz with anticipation, predicting Target’s stock to soar post Q2 announcements, driven by projected revenues and earnings outstripping forecasts. Peering into the future, the company foresees Q2 comparable sales growth ranging from flat to a 2% uptick. Target also eyes an adjusted EPS between $1.95 and $2.35 for Q2. For the fiscal year ahead, it guides comparable sales to be flat to 2% higher, with earnings per share in the range of $8.60 to $9.60.
Target’s strategic focus entails cultivating customer loyalty and boosting revenue through omnichannel endeavors and brand partnerships, a move expected to yield long-term benefits. Introducing the Target Circle 360 subscription tier, offering perks like unlimited free same-day delivery for orders exceeding $35, one-hour deliveries sans fees, and complimentary two-day shipping at an annual subscription cost of $49. Target eyes stealing market share from behemoths like Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT), vying to draw in customers with enticing benefits.
Since the start of the year, TGT stock has inched up by 2% to reach $145, a lukewarm performance compared to the broader indices, with the S&P leaping by 18% in the same timeframe. In stark contrast, Walmart (WMT) has witnessed a mighty 42% surge in its stock over the same period.
The trajectory of TGT stock illustrates a rollercoaster ride, with a 15% slump from $175 in early January 2021 to the current $145 level, as opposed to the S&P 500’s 50% climb over approximately three years. Notably, TGT stock delivered returns of 31% in 2021, a -36% decline in 2022, and a slight dip of -4% in 2023. The S&P 500, on the other hand, saw 27% gains in 2021, plummeted by -19% in 2022, and bounced back with a 24% surge in 2023, underscoring Target’s underperformance against the benchmark index in recent years.
Beating the S&P 500 consistently poses a formidable challenge, witnessed not only by individual stocks but also by heavyweights in the Consumer Staples sector and megacap stars. The Trefis High Quality (HQ) Portfolio, comprising 30 stocks, managed to outshine the S&P 500 every year over the same time frame, showcasing superior returns with reduced risk compared to the benchmark index.
As the fiscal landscape remains uncertain, marked by soaring oil prices and heightened interest rates, an intriguing question looms over Target: will it face a fate akin to 2022 and 2023, underperforming the S&P, or will it stage a remarkable recovery?
Target’s valuation is pegged at $160 per share, hinting at an approximately 11% uptick from the current market value. Dive deeper into our interactive dashboard analysis to unearth more insights on what to expect from Target’s Q2 Earnings Preview.
(1) Revenues Poised to Triumph Consensus Expectations
Anticipated Q2 2024 revenues for Target stand around $25.7 billion, slightly surpassing consensus estimates. The retailer observed a 3% year-over-year dip in Q1 2024 revenues, totaling $25 billion. Target’s Q1 comparable sales dwindled by 3.70%, reflective of lackluster demand for discretionary items like apparel, electronics, and home goods, which constitute the bulk of Target’s revenue. Inventory at the closure of Q1 was 7% lower compared to the preceding year. Looking ahead, Target’s revenues are foreseen to hit $107 billion in fiscal 2024, marking a marginal year-over-year decline.
(2) EPS Expected to Marginally Surpass Consensus Projections
Target’s Q2 2024 earnings per share (EPS) are poised at $2.21 as per Trefis analysis, edging marginally above consensus estimates. The company’s gross margin ascended by 140 basis points to 27.7% in Q1, reflecting reduced markdowns and declining expenses related to freight and supply chain. Additionally, the operating margin inched up marginally to 5.3%. Target’s Q1 2024 EPS settled at $2.03, showcasing almost no fluctuation from the year-ago period.
(3) Target Valuation Echoes Higher Than Current Market Price
According to Target’s Valuation model, with an estimated EPS of approximately $9.35 and a P/E multiple of 17.1x in fiscal 2024, the resultant price per share stands at $160, signaling an approximate 11% premium over the present market price.
Comparing how Target’s peers fare paints an insightful picture. TGT Peers furnishes an overview of how Target’s stock stacks up against competitors on pivotal metrics. Intriguing peer comparisons for companies spanning various industries can be found at Peer Comparisons.
| Returns | Aug 2024 MTD [1] | 2024 YTD [1] | 2017-24 Total [2] |
| TGT Return | -4% | 2% | 100% |
| S&P 500 Return | 2% | 18% | 150% |
| Trefis Reinforced Value Portfolio | 5% | 12% | 733% |
[1] Returns as of 8/20/2024
[2] Cumulative total returns since the end of 2016
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