Target (TGT) stock forecast: more room to run?

What are TGT’s threats and opportunities now that COVID-19 restrictions are being eased?

For the most part, the Target stock forecast is for the popular US retailer’s stock to rise further – beating even the record highs of $228.84 that  TGT’s stock reached towards the end of May.

One key factor in current Target stock predictions is the brand’s delivery of double-digit growth in sales and revenue, which was driven by a surge in e-commerce and a successful same-day delivery operation.

Like other big US retailers, including Best Buy, Target has undoubtedly benefited from the stay-at-home orders during the COVID-19 pandemic. Unable to eat out or travel, consumers have been splurging on electronics and appliances, with government-issued stimulus cheques giving a much-needed boost to the retail sector.

Target’s chairman Brian Cornell said the company’s Q1 performance was “outstanding on every measure” and underlined its continued relevance among consumers, despite there being a myriad of shopping options.

In a further remark that will help inform the Target stock forecast for 2021, he added: “We're confident in continued comp growth in the second quarter and through the remainder of the year, as well as a healthy full-year operating margin rate.” 

Target Corp
Daily change
246.22
Low: 246.22
High: 250.35

Target stock analysis: Doing things differently

Across America, as in Europe, many retailers are closing down their stores and making a concerted shift to serving their customers online. This causes a domino effect in towns and city centres – when one big-name store leaves, once-popular shopping destinations become less of a draw, prompting other retailers to shut up shop, too.

Interestingly though, Target has adopted a different approach. It has positioned its stores at the centre of its multi-channel operation. Instead of solely relying on cavernous warehouses, Target uses its stores as fulfilment hubs. The latest figures suggest that 95% of total sales (both physical and online) were executed through its bricks-and-mortar outlets. 

The promising metrics that have contributed to a boost in Target’s stock price don’t end there. Shoppers are spending more at Target - traffic to the company’s website has increased by 17% and there’s been a 5% growth in the value of items being checked out in customers’ baskets. Same-day services also witnessed year-on-year growth of more than 90% in the first quarter as customers took advantage of click-and-collect offerings.

As Cornell told analysts on an earnings call:

“The distinction between a store sale and a digital sale is largely irrelevant. Because of our unique stores and hub model, more than three-quarters of our first-quarter digital sales were fulfilled by our stores.”

Food and beverages, as well as other essentials, such as loo roll, were the main drivers for growth during the early days of the pandemic last year when many people stockpiled because of concerns about possible shortages. A year on and things have changed. As shoppers get ready to return to restaurants and bars, there has been a 60% increase in clothing sales, while the percentage in sales growth for beauty products has reached the high teens. 

Other fascinating trends that have emerged include a 36% rise in sales of Target’s own-brand products. The retailer said this is the strongest surge ever recorded, and it’s likely that such items will deliver a higher level of profit. (Indeed, operating margin overall in Q1 came in at an “unprecedented” 9.8 per cent, far beyond pre-pandemic levels of 6.4 %.) Looking ahead, the retailer says it has entered into a commitment to add products from more than 500 black-owned businesses by the end of 2025.

In mid-May, Target was among those US retailers that eased mask requirements for shoppers who had been fully vaccinated. And we are now starting to see a trend of consumers returning to stores to browse after many months of snapping up bargains online. The challenge now for Target is to keep the momentum going. Although the TGT stock forecast is optimistic in the short term after executives issued second-quarter guidance that surpassed Wall Street’s expectations, some unpleasant year-on-year comparisons could arise later in 2021.

As of 2019, Target is the eighth-largest retailer in the US in terms of sales. Walmart, Amazon, Kroger, Costco, Walgreens, Home Depot and CVS appear higher up in this list.

FAQs

In terms of the TGT stock forecast, 19 analysts currently have a Buy recommendation in place. A further three believe that Target has the potential to Outperform the market. Seven have a Hold rating, and just one recommends selling.

According to CNN Business, the Target stock price forecast suggests the retailer’s stock will surge to new record highs over the next 12 months. The median view indicates there will be a 10.1% jump to $250, while the highest estimate predicts a 34.3% rise from current levels to $305. The low-end forecast of $176, a fall of 22.5%, hinges on sales falling substantially as the economy reopens.

It’s difficult to make an accurate Target stock forecast so far ahead. As we’ve seen over the past five years, the retail sector is undergoing a seismic shift. Long-running titans such as Target, Best Buy, JC Penney and Macy’s are having to fight hard to protect their businesses from e-commerce giants, such as Amazon. Some are winning the battles, others are not. For Target, continued growth in digital sales is crucial. It also needs to ensure that its product line continues to appeal to an increasingly young demographic.

Yes, it is paying a dividend of $0.68 for the current quarter.

There are several ways to buy Target stock. One method is through Currency.com, where you can buy Target stock in tokenised form.

FURTHER READING

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