JPMorgan Downgrades Target's Stock

Leah Barkoukis | June 02, 2023 7:30 AM

JP Morgan downgraded its outlook for Target’s stock on Thursday from overweight to neutral, citing “too many concerns rising” for the retail giant.

The company has been subject to boycotts since rolling out its massive “pride” displays in stores that have included controversial products such as “tuck-friendly” swimsuits, merchandise by a transgender designer behind the “Satan respects pronouns” gear, and other items that are geared toward children. Target reportedly held an “emergency” meeting over the displays, which in some stores have been scaled back and moved to more obscure areas. Other items were also reportedly pulled, though conservatives have still been able to find them despite what the company claims.

Other factors also listed for the company's stock performance include a weakening economy, high inflation, and the resumption of student loan payments.

JP Morgan has downgraded Target $TGT and cited 4 primary reasons:

1) A weakening consumer
2) Grocery disinflation
3) Loss of market share
4) Overexposure to millennial customers who may soon face a resumption in student loan payments pic.twitter.com/5RHrQZdD6V
— Barchart (@Barchart) June 1, 2023

The stock ended Wednesday’s session down 2.2%, marking its ninth straight decline and the stock’s longest losing streak since an 11-day stretch that ended Feb. 24, 2000, according to Dow Jones data. Wednesday also marked the stock’s lowest close since Aug. 11, 2020.
Target TGT, +0.18% shares fell 1.7% in premarket trading Thursday. The stock has fallen 12.2% in 2023, compared with the S&P 500’s SPX, +0.99% gain of 8.9%. (Market Watch)

“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.

“While still positive on a [three-year] basis, [Target] has been giving back share on a [one-year] view and we believe this share loss could accelerate into 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.”