Target Tops 4Q Estimates As Digital Sales Surge 118%; Shares Slip 7%

Target Corp. reported better-than-expected 4Q results, driven by robust digital sales and same-store sales (comps). However, shares of the discount store operator closed 6.8% lower on Tuesday.

Target (TGT) reported 4Q revenues of $28.3 billion that topped consensus estimates of $27.5 billion. Revenues grew 21.1% year-over-year, driven by strong comps growth of 20.5%. Target’s comps growth was driven by a 6.5% increase in traffic and 13.1% growth in average ticket sales. The company’s store comps grew 6.9%, while digital comps surged 118%.

4Q earnings of $2.67 per share surged 58% year-over-year and beat analysts’ expectations of $2.54, reflecting top-line growth and higher gross and operating margins.

In addition, Target is planning strategic investments of about $4 billion each year over the next several years to “accelerate new store openings and store remodels, enhance fulfillment services and strengthen its supply chain,” the company said.

The company did not provide financial guidance citing COVID-19 uncertainties. However, the company’s CEO, Brian Cornell, said, “As we look ahead to 2021 and beyond, we see continued opportunity to invest in our business and our team, building on the strong foundation we’ve established to drive market share gains and deliver profitable growth for years to come.” (See Target stock analysis on TipRanks)

Following the results, Raymond James analyst Bobby Griffin maintained a Buy rating on the stock. In a note to investors, the analyst said, “F4Q20 results support our thesis that the company’s investments into supply chain, private-label, and omnichannel distribution have positioned it to gain significant market share over the coming years.”

Overall, the Street has a bullish outlook on the stock with a Strong Buy consensus rating based on 11 Buys and 2 Holds. The average analyst price target of $217.58 implies upside potential of about 25% to current levels. Shares have gained about 72% over the past 12 months.

Furthermore, TGT scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.

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