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Why Analysts Maintain a Neutral Rating on Target

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Apr. 9 2018, Updated 7:30 a.m. ET

The majority of analysts remain on the sidelines

Target (TGT) has been witnessing an improved sales and earnings trend, which has led analysts to raise their target price on its stock. The graph below shows an uptrend in analysts’ target price on Target. Target’s top line is expected to improve in the coming quarters thanks to lower pricing, differentiated offerings through exclusive brand launches, and store remodeling. Meanwhile, fast delivery of online orders through its multiple fulfillment options is expected to drive its digital sales higher, which in turn, is likely to contribute to its comps growth rate.

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Also, management expects its EPS to stabilize in fiscal 2018 and see recovery in the upcoming quarter driven by improved sales, supply-chain reinvention, lower interest expenses, and share repurchases. Despite the company’s improving sales and earnings trend, analysts remain on the sidelines as the company’s growth measures are coming at the cost of margins. Margins have continued to slide over the past several quarters. Increased competition from Walmart (WMT), Costco (COST), and Amazon (AMZN) could restrict Target’s growth rate.

Rating summary

Of the 26 analysts providing recommendations on Target stock, 17 analysts recommend a “hold.” Meanwhile, six analysts suggest a “buy,” while three analysts maintain a “sell” rating. Moreover, analysts maintain a consensus target price of $76.31 per share on TGT, which indicates an upside potential of about 10.0% when compared to its closing price of $69.53 on April 3, 2018.

The majority of analysts also maintain a “hold” recommendation on Walmart stock. However, they remain positive on Costco’s prospects.

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