Target Earnings: Shares Crater Amid Weak Demand for Discretionary Items, Further Margin Pressure

We plan to lower our $140 fair value estimate on no-moat Target by a low- to- mid-single-digit percentage after the retailer’s third-quarter results of 1% top-line growth and $1.85 in EPS landed well below our expectations. Management also cut its full-year EPS guidance to a range of $8.30-$8.90 from $9.00-$9.70 previously. Thus, we plan to reduce our forecast for fiscal 2024 comparable sales to a slight decline from a 0.5% gain and bring our EPS forecast to within management’s updated guidance range from our $9.31 preprint estimate. Still, our planned fair value estimate cut does not rival the 20% intraday selloff in shares on Nov. 20, as we consider our longer-term outlook for 2.5% comparable sales growth and an operating margin of around 6.0%-6.5% to be intact.