Target's Analyst Ratings Plummet 25% on Earnings, Tariffs

Target Corporation, a major retailer in the United States, has seen a significant decline in analyst expectations, reaching the most pessimistic levels since 2018. This shift is primarily due to the company's disappointing financial report, which has led to a series of downgrades from analysts. The report highlighted several challenges, including a difficult macroeconomic environment, uncertain future prospects, and the impact of Donald Trump's tariff policies.

Following the release of Target's financial report, analysts from several firms, including American Bank, Melius Research, and Telsey Advisory Group, withdrew their previous "buy" ratings. The consensus rating for Target, calculated based on the proportion of buy, hold, and sell recommendations, dropped to 3.5, the lowest level since November 2018. This rating is lower than those of competitors such as Walmart, TJX Companies, and Costco.

Analysts from American Bank, Robert Oms and Kendall Toscano, noted in a report that despite the company's valuation being near a 10-year low, the continued decline in revenue and increased uncertainty are concerning. They downgraded Target's rating to "neutral." Target's stock price rose 2.2% on Thursday, after a previous decline due to the financial report. As of Thursday's close, the stock has fallen approximately 30% year-to-date, resulting in a market capitalization loss of nearly 18.8 billion dollars. In contrast, the S&P 500 Consumer Staples Index has risen over 5.3% during the same period.

The company lowered its annual sales forecast due to a significant reduction in consumer spending and the impact of tariffs and boycotts resulting from the suspension of its diversity initiatives. Target's CEO, Brian Cornell, is facing increasing pressure, with external doubts about his ability to restore growth after two years of volatile performance.

Joseph Feldman, an analyst from Telsey Advisory Group, expressed that Target's weak first-quarter performance and the expanded range of its annual guidance have shaken his confidence in the company's investment prospects. Feldman downgraded the stock to "market perform." Meanwhile, Jacob Aiken-Phillips from Melius Research downgraded Target to "hold," citing multiple factors, including the company's greater exposure to tariffs compared to the overall retail industry. Aiken-Phillips also noted the growing consumer opposition to Target's "Belonging at the Bullseye" strategy.

Aiken-Phillips pointed out that even before tariffs became a focal point, Target's non-essential categories were already underperforming. Now, the backlash against the company's diversity, equity, and inclusion (DEI) policies has added another layer of risk. Feldman from Telsey also highlighted that competitors like Amazon, Costco, and Walmart are gaining market share in some of Target's core categories, particularly among high-income consumers, by offering a wider range of products, more competitive pricing, and greater convenience.

Despite these challenges, American Bank's Oms and Toscano noted that the growth of Target's high-margin businesses, including its marketplace platform, could help stabilize its profitability in the long term. Currently, Target has 12 "buy" ratings, 26 "hold" ratings, and 2 "sell" ratings.