Buy, Hold or Sell Target Stock? Key Tips Ahead of Q1 Earnings

Core Viewpoint - Target Corporation is expected to report first-quarter fiscal 2025 earnings on May 21, with projected revenues of $24.45 billion, reflecting a slight decline of 0.3% year-over-year, and earnings per share estimated at $1.68, indicating a drop of 17.2% from the previous year [1][2]. Financial Estimates - The Zacks Consensus Estimate for earnings has been revised downward by six cents over the past week, with current estimates for the next quarters showing a downward trend [2]. - Target's trailing four-quarter average earnings surprise stands at 1.5%, with the last quarter's earnings surpassing estimates by 7.1% [2]. Earnings Prediction - The current Zacks Rank for Target is 5 (Strong Sell) with an Earnings ESP of -9.91%, indicating a lack of strong indicators for an earnings beat this quarter [5][6]. Market Outlook - Target has provided a cautious outlook for Q1 2025, citing significant profit pressure due to consumer uncertainty, a slight decline in net sales for February, tariff concerns, and the timing of certain expenses [7]. - Despite record Valentine's Day sales, overall performance in February was subdued, impacted by unseasonably cold weather and declining consumer confidence affecting discretionary spending [8]. Revenue Vulnerability - Target's revenue is significantly derived from discretionary segments, which are volatile and susceptible to external shocks, with expectations of a 1% decrease in comparable sales and a 1.6% drop in average transaction amounts [9]. Strategic Initiatives - Target's focus on innovation, digital growth, and store enhancements is expected to positively influence first-quarter performance, with initiatives like same-day services and curbside pickup likely driving increased customer engagement [10]. Stock Performance - Target's stock price has increased by 4.3% over the past month, outperforming the Zacks Retail–Discount Stores industry, which rose by 1.5% [11]. - The stock is currently trading at a forward 12-month P/E multiple of 10.67X, significantly below the industry average of 32.49X and below its median P/E level of 14.65 over the past year [15]. Investment Considerations - The company is facing challenges in discretionary spending and margin pressure, with ongoing investments in digital growth and operational improvements that may take time to yield benefits [16]. - Investors may want to adopt a cautious approach, waiting for clearer signs of recovery in sales trends and margin performance before making significant investment decisions [17].