NEW YORK (TheStreet) -- Target (TGT) - Get Report stock is down 0.1% to $77.07 in morning trading Thursday after Jefferies reduced its price target to $73 from $76, while maintaining its "hold" rating.
Analysts said that risks with this stock include increased price competition, a choppy transition as Target's new CEO tries to turn around the business, greater-than-expected dilution in Canada, and negative margin mix shift.
In its fourth quarter of 2015, Target posted earnings of $1.51 per share, higher than the year-ago quarter of $1.31. For its 2015 fiscal year, the retailer posted total earnings of $4.23 per share versus s$4.38 per share in 2014.
In 2015, Target reported fiscal year total sales of $72.61 billion, higher than last year's total sales of $71.27 billion.
Analysts forecast that in 2016 and 2017, Target will earn $4.54 and $4.86 per share, respectively. They also anticipate total sales of 73.9 billion and $75.75 billion in 2016 and 2017, respectively.
"As we expected, the company is saving its annual and long-term earnings and sales forecast for CEO Brian Cornell's first-ever analyst day on March 3. On the heels of today's results, we're even more bulled up heading into this event.
There's lots to be excited about when it comes to Target's results and commentary. For one, traffic was the primary driver of fourth-quarter growth and digital sales contributed nearly a full 100 basis points to the comp number. We've seen a rapidly accelerating trend of digital contribution, from almost zero just a year ago to 70 basis points in the third quarter to 100 basis points in the fourth quarter. We expect this uptrend to continue, especially in light of the company's recent decision to reduce the order threshold for free shipping to $25 from $50.
This new minimum is among the most compelling offers in digital retail, putting Target well ahead of its key competitors. The move is also clearly aimed at combatting Amazon (AMZN:Nasdaq), and we believe Target is starting to emerge as a real competitive threat for the online retailer. Relative to its long-term potential, Target is in the nascent stages of digital growth, but its aggressive strategy should position it well in the long- term. Although the company was admittedly late to fully embrace the digital channel, it has caught up to the competition far quicker than any imagined thanks to Cornell's elevated emphasis."
Separately, TheStreet Ratings team rates TARGET CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate TARGET CORP (TGT) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TGT's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 2.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.87, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 33.79% over the past year, a rise that has exceeded that of the S&P 500 Index. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- The net income growth from the same quarter one year ago has exceeded that of the Multiline Retail industry average, but is less than that of the S&P 500. The net income increased by 2.9% when compared to the same quarter one year prior, going from $341.00 million to $351.00 million.
- TARGET CORP's earnings per share improvement from the most recent quarter was slightly positive. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, TARGET CORP reported lower earnings of $3.07 versus $4.53 in the prior year. This year, the market expects an improvement in earnings ($4.16 versus $3.07).
- You can view the full analysis from the report here: TGT Ratings Report