Goldman Sachs has released a research report maintaining a "Neutral" rating on Target (TGT.US), with a 12-month price target set at $97. The report notes that while some investors are optimistic about its valuation advantages and potential from a lower performance comparison base, the firm believes the company's multiple core operational metrics have been weak since the fourth quarter, and the effectiveness of the new management's strategic adjustments still requires time to observe. The report indicates that Target has recently faced multiple operational challenges. On the consumer demand side, Google search trends show that its search popularity in the fourth quarter (November-December) has consistently been lower than the previous two years, with no significant boost even during the Black Friday shopping season; Placer's monthly in-store foot traffic data reveals a 4.4% year-over-year decline from December to date, which, while improved from the February low, remains in negative territory; Bloomberg Alternative Data shows that the company's adjusted observed sales for the fourth quarter fell 6.8% year-over-year, worsening from the -2.6% decline in the third quarter. Consumer confidence indicators are similarly concerning. HundredX data indicates that while Target's Net Promoter Score (NPS) and Net Purchase Intent (NPI) saw a temporary rebound after hitting a three-year low in early May, the recent pace of improvement has slowed, with weekly NPS even declining in some periods. As of December 15th, its NPI was -7.2% and NPS was 27.8, both metrics significantly below historical norms. Furthermore, Sensor Tower data shows that despite a 1.6% year-over-year increase in monthly active users (MAU) in November, the company's app downloads decreased by 13.5% year-over-year. On the operational front, Target has also encountered short-term setbacks. On December 19th, the company's application and website experienced intermittent outages lasting several hours, impacting online order fulfillment and tracking. Although the issue was fully resolved the next day, with $20 gift cards issued to affected users, it still caused some disruption to peak-season sales. Simultaneously, Goldman Sachs mentioned that activist investor Toms Capital has purchased an undisclosed stake in Target, adding uncertainty to the company's future development due to changes in its shareholder structure. It is worth noting that Target appointed former Chief Operating Officer Michael Fiddelke as its new CEO in August. Goldman Sachs stated it will continue to monitor the specific measures taken by the new management regarding business optimization and investment strategy adjustments. Recently, the company has begun increasing investment in the in-store experience; Goldman Sachs confirmed these investment actions through on-site inspections of the Westbury and Soho stores but noted they have not yet translated into significant operational improvements in the short term. Goldman Sachs concludes that although Target reset its profit guidance for fiscal year 2025 when it released its first-quarter earnings in May, a shift to a more positive view would require seeing signs of improvement in the company's comparable store sales trend.
Comments