Is it safe to buy Target stocks after a new warning on profit?


Mircea Vasiu

Jun 7, 2022

Target issues a new profit warning

The stock price drops by more than 8% before recovering

Most analysts have buy recommendations

Target stock sinks by more than 8% today as the company issued another warning on profit. Since the opening hours, though, the stock price recovered half of the losses.

The company reported earnings misses in May, blaming rising fuel prices as a cause for missing the estimates. Excess inventory is another reason why Target issued the new warning on profit.

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At the current level, Target’s stock price has almost halved since making a double top pattern in the second part of 2022. With no technical support level in sight, investors will focus on the pivotal level seen at the $100/share.

Since it broke above $100 the stock price found support the first time it tested the level. If the current weakness continues, one should not be surprised to see support being tested again.

Out of the 71 analysts covering Target’s stock price, 48 have issued buy ratings, and 22 have neutral ones. Only one analyst has issued a sell rating.

Most recently, Credit Suisse maintained its buy recommendation with a $180/share price target. The same did Jefferies & Company, this time with a price target of $168/share.

Target is one of the US companies with the longest dividend growth history. It increased the annual dividend paid to shareholders in the past 54 consecutive years, and the forward dividend yield is 2.25%.

Target is one of the biggest operators of general merchandise stores in the United States. It was founded in 1902 and employs close to half a million people.

At the same time as the profit warning, the management announced measures to fix the business. As such, it plans additional markdowns, it is canceling orders, and removing excess inventory.

The swift response is expected to lead to improved profitability in the second half of the year and beyond.

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