Target (NYSE:TGT) is scheduled to announce its results for the second quarter of Fiscal 2023 on August 16. Analysts expect macro pressures to weigh on the retailer’s top line, given that it has more exposure to discretionary items than many peers. Also, investors have been concerned about the possibility of higher markdowns due to intense competition hurting Target’s margins and the backlash from the LGBTQ+ controversy.
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Q2 Earnings Expectations for Target
In the fiscal first quarter, Target’s revenue grew 0.6% year-over-year to $25.3 billion, as the strength in categories like beauty, food and beverage, and household essentials was offset by persistent softness in discretionary merchandise like apparel. Adjusted EPS declined 6% to $2.05, reflecting the impact of higher shrink (or retail theft) and increased expenses.
Target guided for a low-single-digit decline in Q2 FY23 comparable sales and adjusted EPS in the range of $1.30 to $1.70.
Meanwhile, analysts expect the company’s Q2 FY23 adjusted EPS to increase to $1.44 from $0.39 in the prior-year quarter, driven by cost reduction efforts. Revenue is expected to decline by 3% to $25.2 billion due to continued softness in Target’s discretionary categories.
Heading into Q2 FY23 results, several analysts lowered their price target for TGT stock, reflecting their concerns about the company’s performance.
On Monday, Stifel analyst Mark Astrachan lowered his price target for TGT to $160 from $175 and reaffirmed a Hold rating on the stock. The analyst anticipates comparable sales growth to continue to be negatively impacted by subdued discretionary spending.
On August 9, Wells Fargo analyst Edward Kelly reduced his price target for Target to $135 from $165 and maintained a Hold rating on the stock. Kelly expects Target to slash its full-year guidance due to the LGBTQ+ controversy, which exacerbated macro headwinds. Kelly feels that it’s difficult to own TGT shares without more clarity on normalized earnings.
Last week, Citigroup analyst Paul Lejuez reiterated a Hold rating on Target with a price target of $130. The analyst expects the company’s Q2 FY23 revenue and earnings to miss Wall Street’s estimates. Based on the deceleration in the company’s traffic in late May that continued through June, as indicated by his firm’s foot traffic data, the analyst projects sales to decline 5.5% in the fiscal second quarter. He expects EPS of $1.27.
Lejuez also expects TGT’s management to lower the high end of the full-year EPS guidance due to weak Q2 sales trends.
Is Target a Buy, Sell, or Hold?
With 13 Buys and 15 Holds, Wall Street has a Moderate Buy consensus rating on Target. The average price target of $162.16 implies 29.7% upside. Shares have declined 16.5% since the start of this year.
Insights from Options Trading Activity
TipRanks now presents options activity to help investors plan their trades ahead of earnings releases. Options traders are pricing in a 7.4% move on Target earnings. TGT shares have averaged a (4.4)% move in the last eight quarters. In particular, the stock rose 2.6% in reaction to Q1 FY23 results.
The anticipated move is determined by computing the at-the-money straddle of the options closest to the expiration after the earnings announcement.
