Target (TGT) stock has seen a 21% increase year-to-date, reaching around $172 per share. This growth is compared to a 9% increase in the S&P index. Target’s shares have surged in anticipation of a rebound in growth after experiencing slowing sales in 2023. Despite a 2% decrease in revenues year-over-year, Target showed progress on margins in fiscal year 2023. The retailer’s comparable sales fell by 3.70% in 2023, reflecting weak demand for discretionary goods like apparel and electronics. However, its profitability improved significantly, with gross and operating margins both showing improvement. The retailer’s full-year earnings per share in 2023 rose to $8.94, up 50% from the previous year.
The performance of TGT stock has been lackluster compared to the S&P 500 over the past three years. While the stock saw a 31% return in 2021, it experienced -36% and -4% returns in 2022 and 2023, respectively. In contrast, the S&P 500 saw returns of 27% in 2021, -19% in 2022, and 24% in 2023. Target has struggled to outperform the index, a trend seen across various sectors and individual stocks. The Trefis High-Quality Portfolio, consisting of 30 stocks, has consistently outperformed the S&P 500 over the same period. The uncertain macroeconomic environment with high oil prices and elevated interest rates raises questions about whether Target will underperform the S&P in the next year or see a strong jump in performance.
The forecast for Target’s revenues in fiscal year 2024 is $107.9 billion, marginally up year-over-year. Adjusted earnings per share are expected to be $9.42 for the fiscal year. Based on these forecasts, Target’s valuation is estimated to be $178 per share. The company’s stock price is still significantly below the all-time high set in late 2021. Looking ahead, Target anticipates a 3-5% comparable sales decline in the first fiscal quarter. Earnings per share for the quarter are expected to be between $1.70 and $2.10. For the full fiscal year, the company is guiding for comparable sales to be flat to up 2%, with earnings per share in the range of $8.60 to $9.60.
Target recently announced a new subscription tier called Target Circle 360, offering unlimited free same-day delivery for orders over $35 in one hour, free two-day shipping, and other perks for $49 per year. This move is aimed at attracting customers from competitors like Amazon and Walmart. The company is focused on adding new benefits to enhance its customer experience and compete effectively in the retail industry. Comparisons with peers in the industry can provide insights into how Target’s stock performance and strategies stack up against other companies.
Overall, Target’s stock is currently considered fairly priced at around $172 per share. Despite challenges in sales growth, the company has shown improvements in margins and profitability. Investors are optimistic about Target’s potential for growth in 2024. However, there may be short-term pressure on the stock due to sluggish sales trends. Target’s focus on enhancing its offerings and attracting new customers through subscription services and other benefits will be crucial for its future success in the competitive retail market.
