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KeyBanc just turned dovish on Target stock: find out why

on Jun 5, 2023
  • KeyBanc downgraded Target to "sector perform" on Monday.
  • Analyst Bradley Thomas explained why in a research note.
  • Target stock is already down over 25% versus its YTD high.

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Target Corp (NYSE: TGT) has lost nearly 20% in less than a month but a KeyBanc analyst still doesn’t find this stock as attractive.

What could hurt the Target stock?

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On Monday, Bradley Thomas downgraded the big box retailer to “sector weight” and said the Street estimates were too high.

The analyst is dovish on the Target stock primarily because of the student loan payments that are slated to resume in the coming months now that President Biden has signed the debt ceiling bill.

Give the recent sell-off, we believe near-term downside may be limited, but we see the growing risk of student loan payments as likely pushing out the margin recovery story at least another year.

His call arrives only weeks after the retail behemoth reported market-beating results for its fiscal first quarter.

Target’s guidance for Q2 was weak

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Target Corp has recently faced a fierce anti-LGBTQ+ backlash related to its Pride collection.

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Thomas is dovish on the grocery chain because it’s guidance for the current quarter came in a bit shy of Street estimates last month. In his research note, the analyst also said:

We believe downside risk may be elevated for Target Corp relative to competitors while sales and margin headwinds continue to intensify for the broader retail environment.

He’s convinced that a consumer spending slowdown could be a real risk for the Minneapolis-headquartered firm. Thomas downgraded Target stock today even though it pays a dividend yield of 3.31% at writing.


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