Reasons for the Downgrade

JPMorgan recently downgraded retail giant Target from overweight to neutral with a $144 price target down from $182. The firm cited four key reasons for the downgrade:

• Weakening consumer
• Grocery disinflation
• Loss of market share
• Overexposure to millennial customers subject to a resumption in student loan payments

Analyst’s Perspective

According to JPMorgan analyst Christopher Horvers, Target is “at the center of a number of consumer headwinds,” and the bank sees a risk of downward earnings revisions rising. Horvers also stated that the bank is lowering expectations for forward guidance into 2024 and now expects full-year earnings of $9.90 per share next year, down from a previous forecast of $10.37.

Target’s Performance

Shares of Target have slipped 12.1% in 2021. Last month, the company reported that fiscal first-quarter sales barely grew from the year-earlier period and predicted sluggish sales growth for the current quarter. Target stock has been under pressure this year with a 12.2% fall.

Conclusion

While JPMorgan’s downgrade of Target stock to neutral may cause some concern among investors, the bank’s reasons for the downgrade and lowered forecast should be taken into consideration when evaluating the company’s potential performance going forward.

Source: AsumeTech