Target (TGT) is in a pickle.
Over the last few days, the retailer dropped from about $162 to $131.11.
Not only is the company facing backlash from the LGBTQ+ situation, it was just downgraded to neutral from overweight by analysts at JPMorgan. It’s also coming under pressure from stretched consumers, and could see even more pressure when student loan repayments start up again.
“We continue to believe that the consumer is broadly weakening while the share of wallet shift away from goods (51% of [Target’s] sales) is ongoing,” wrote JPMorgan analyst Christopher Horvers. Disinflation in grocery is also continuing to accelerate, according to Horvers, as quoted by MarketWatch.com.
“While still positive on a [three-year] basis, [Target] has been giving back shares on a [one-year] view and we believe this share loss could accelerate back to school and linger into holiday given consumer pressures and recent company controversies,” wrote Horvers. “This could turn [Target’s] traffic negative after an impressive run of 12 consecutive positive quarters.”
But in all likelihood, most of the chaos has been priced into the stock.
At this point, the drop has become overkill. And it may be time to buy when others are fearful, as Warren Buffett has often said. And it may be time to buy the blood in the streets, as Baron Rothschild would tell investors. Better, investors can get paid to wait for the Target stock to recover, with its current 3.29% yield. Plus, TGT now trades with a price to sales ratio of 0.81, and with a PEG ratio of 0.65. That’s ridiculous, as is the pullback.
In short, Target is dealing with a temporary rough patch – and this may be the point when patient investors should step in and buy. Once the chaos has become a distant memory, the stock is likely to push even higher, especially with back to school shopping season and the 2023 holiday season now just months away.