Target stock soars 17% to a 3-month high; What’s behind the rally?

Target (NYSE: TGT), one of the leading retail giants in the United States, faced persistent challenges in 2023. 

Struggling against shifting consumer sentiment, sluggish sales, and weakened demand for specific product categories, Target’s stock market performance reflected these difficulties. Moreover, widespread boycotts against the controversial Pride-themed clothing line for children exacerbated the company’s woes. 

However, on Wednesday, November 15, Target experienced a significant turnaround, with its stock surging more than 17%, providing a much-needed boost.

What caused Target’s stock price surge?

The large spike in TGT shares came after the retailer revealed a big earnings beat for the fiscal Q3 2023. 

Driven by robust sales in specific categories such as food and beauty, Target reported earnings per share (EPS) of $2.10, smashing the Wall Street estimates of $1.48.

Revenue came in at $25.4 billion, also above the estimated $25.24 billion. 

Still, the headwinds that have been troubling Target throughout 2023 are far from gone. Notably, consumers are mainly buying essential products, and continue to hunt for lower prices. 

The company’s comparable sales – which do not take into account the impact of store openings, closures, and renovations – fell for the second consecutive quarter. 

The retail industry has been experiencing a slowdown as consumers faced a budget crunch caused by elevated prices. This has been particularly detrimental for Target, which sells a heavier combination of clothing, home goods, and impulse purchases compared to rivals. 

TGT stock price analysis

At the time of publication, shares of Target were standing at $129.21, up 17.26% in the past 24 hours.

The upswing took TGT’s stock price to a three-month high, however, its year-to-date performance remains negative at -14.1%, significantly underperforming the broader S&P 500 index, which climbed 18% this year. 

Analysts at RBC Capital Markets said Target’s report was better than anticipated almost across the board, although it “does not change the fact that the consumer backdrop seemingly deteriorated throughout the quarter,” they wrote in a post-earnings note.

The retailer expects roughly the same performance in the current holiday quarter, forecasting EPS in the range of $1.90 to $2.60, and a mid-single-digit decline in comparable sales. 

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