Target stock hit with downgrades, analysts point to market share erosion

Investing.com - Citi and Deutsche Bank (ETR:DBKGn) downgraded Target Corporation (NYSE:TGT) stock, citing market share erosion and a weaker outlook from the retailer. Target Corp. shares plunged 20% to $124.15 on Wednesday.

The company lowered its full-year earnings forecast to $8.30-$8.90 per share from its prior range of $9-$9.70, while issuing a flat comparable sales projection for the fourth quarter.

Citi cut its rating to “neutral” from “buy,” warning that Target is losing market share to Walmart (NYSE:WMT) Inc., especially among higher-income shoppers.

“With Walmart mkt share gains coming largely from higher income consumers TGT seems to be the one most at risk of losing additional share,” Citi analyst Paul Lejuez wrote in a note.

Deutsche Bank also downgraded Target to “hold” from “buy,” citing a need for significant infrastructure and supply chain investments to stay competitive, which could weigh on margins.

“While we still believe TGT's long-term potential remains, regaining lost market share will likely require substantial price investments and stepped-up promos, pressuring margins and profitability,” said Deutsche Bank analyst Krisztina Katai, who hacked price target for the stock to $108.

The brokerage highlighted several risks, including inventory challenges, ongoing margin pressure, and volatile consumer sentiment, as it factored in lower earnings expectations and a reduced valuation multiple.

World's no. 1 retailer Walmart lifted its annual sales and profit forecast on Tuesday, as it clinched market share in groceries and merchandise.