Target (NYSE:TGT) saw its shares slip Wednesday. This, after Wells Fargo downgraded the stock to equal weight from overweight. The firm said Target’s “outlook has deteriorated” and the stock is not an attractive investment amid broader economic uncertainty.
According to Wells Fargo analyst Edward Kelly, “TGT's outlook has deteriorated meaningfully and we no longer see it as an attractive investment into an uncertain 2023, Our concerns include the potential for a sustained period of comp weakness in general merchandise, an inflection to negative traffic in Q4, a lack of visibility on the timing/magnitude of the margin recovery story, and the return of pre-COVID model scalability concerns.”
As such, Kelly cut his rating on the stock to Equal Weight from a prior Overweight and reduced his price target to $142 from $170.
Kelly told clients that shifting to a more conservative, defensive orientation is certainly prudent at present. However, the opportunities in consumer staples retail names “don’t look particularly compelling” to start the year, in his view.
What’s more, Target, like other retailers, has a theft problem. In recent months, the big box retailers have been complaining about an increase in "shrinkage," a retail industry term for when in-store stock is lower than what's accounted for in the books. In other words, people walking out of the store with unpaid inventory is on the rise.
TGT shares staggered $1.05 to $150.68.
