Target (TGT) is scheduled to report results of its third fiscal quarter before the market open on Wednesday, November 17, with a conference call scheduled for 8:00 am EDT. What to watch for:
1. OUTLOOK: While the company didn't provide specific FY21 guidance due to the "highly fluid" outlook for consumer shopping patterns and the impact of COVID-19, Target forecast second half comparable sales up in the high single digits, with operating margin rate for the fiscal year of at least 8%. On its last earnings conference call, Target said it was "well-positioned" for the fall and that it was managing through cost pressures.
2. PACE OF GROWTH SHOULD SLOW: Goldman Sachs analyst Kate McShane removed Target from the firm's Conviction List while keeping a Buy rating on the shares with a price target of $308, up from $281. Target has gained share across all categories over the past 18 months supporting double digit sales growth and "outsized" operating income growth, but the pace of its revenue growth should slow into 2022 to be in-line with historical levels, McShane told investors in a research note on October 18. The analyst, however, thinks Target is well positioned to retain its customer and market share gains earned over the past 18 months.
3. AFFIRM, SEZZLE PARTNERSHIPS: Target announced partnerships with Sezzle and Affirm (AFRM) for buy now, pay later options. The company said: "Depending on what you want to buy and how long you'd like to spread your payments out, Sezzle and Affirm offer a range of convenient options, timelines and services based on guest eligibility...For purchases over $100 - from big-ticket gift items like electronics to that new furniture set you've been eyeing - Affirm provides a convenient way to pay at your own pace with monthly payments."
After Target shared an update on its Buy Now, Pay Later, or "BNPL," offerings ahead of the holiday shopping season, Morgan Stanley analyst James Faucette noted that Target has been offering Affirm as an option to customers since the third quarter of 2019, but he thinks many investors may have been unaware of the companies' ongoing relationship since it predated Affirm's IPO, Faucette said.
4. SHARES COULD HIT $320: Tigress Financial analyst Ivan Feinseth reiterated a Buy rating and initiated a 12-month target price of $320 on August 26. Target's expanding e-commerce and omnichannel fulfillment initiatives position it well to benefit from strong consumer spending trends, Feinseth said. The analyst believes further share upside exists following the company's "strong" Q2 results.
5. HOLIDAY SEASON: Target said it will hire 100,000 seasonal team members at its stores across the country to supplement its current team, and many seasonal team members will have the opportunity to remain with Target following the holiday season. Target also said it would provide five million more hours to current stores team members this holiday shopping season, resulting in more than $75M more in pay for its existing team.
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