JPMorgan Downgrades Target As Concerns Mount About The Retail Giant

JPMorgan has expressed concerns about the potential challenges that lie ahead for Target, leading to a downgrade of the retail giant's stock rating from overweight to neutral. The bank has revised its price target for Target to $144, a decrease from the previous $182. Despite this adjustment, JPMorgan's forecast suggests a potential upside of around 10% for Target stock based on the closing price of $130.93 per share on Wednesday.

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The downgrade is based on four key factors outlined by JPMorgan. Firstly, there is a perceived weakening in consumer sentiment. Secondly, the grocery sector is experiencing disinflation, which could impact Target's performance. Thirdly, Target is facing a loss of market share. Finally, the company's exposure to millennial customers who may face the resumption of student loan payments adds to the concerns.

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JPMorgan analyst Christopher Horvers explained that Target is currently facing multiple headwinds in the consumer landscape. With a significant portion of its sales (51%) coming from discretionary categories, coupled with disinflation in more consumable categories, the risk of downward earnings revisions is seen as increasing. Furthermore, there is an anticipated acceleration in the share of wallet reversion and the potential impact of student loans coming due.

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In light of these concerns, JPMorgan has adjusted its forward guidance for Target, lowering its expectations for full-year earnings in 2024 to $9.90 per share, down from the previous forecast of $10.37.

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Target's stock has experienced a decline of 12.1% in 2023. In the previous fiscal first quarter, the company reported minimal growth in sales compared to the same period last year. Target also expects sluggish sales growth for the current quarter, further contributing to the bank's decision to downgrade its rating.

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