RBC Cuts Target (TGT) Price Target Amid In-Line Results and Model Adjustment

RBC lowered its price target for Target Corporation (TGT) to $120 per share, down from $135, after the retailer reported fourth-quarter earnings that were in line with consensus estimates. The adjustment comes despite a 1.3% year-over-year increase in same-store sales and a 4.2% rise in comparable store sales in the U.S., which suggest underlying demand resilience in the consumer discretionary sector. The firm's revised valuation model incorporates updated assumptions around operating margins, inventory turnover, and long-term growth projections, reflecting a more conservative view of Target's ability to sustain margin expansion in a challenging macro environment. While TGT reported adjusted earnings per share of $2.76, exceeding expectations by $0.05, the lack of meaningful upside in revenue growth—up 2.1% YoY—limited enthusiasm. The equity research note highlights that Target’s ongoing investments in supply chain efficiency and digital infrastructure may not yield immediate returns, prompting RBC to revise its five-year earnings growth forecast downward to 5.5%, from 6.8% previously. This change underscores a broader sector trend of reevaluating growth trajectories amid elevated interest rates and cautious consumer spending. The downgrade has prompted modest trading activity, with TGT shares slipping 1.6% in early post-earnings trading. Investors in the retail space, particularly those focused on large-format discounters, are likely to reassess their exposure to TGT as the market digests the shift in sentiment. Analysts tracking consumer discretionary equities are watching for further signals from peer retailers in the coming weeks.