$TGT Q3 2022 Earnings Report
$TGT Long
Target was one of the many companies that were heavily impacted by high inflation and lower spending. In the last quarter, they weren’t able to beat the estimates and had a massive 25% decrease in their value. This time, however, things could change. As inflation is slowing down and customers are getting used to new prices, many companies in the same sector seem to have been seeing favorable results. One example of that is Walmart. In their last report, they delivered weak results that caused a 12% decrease in their stock. However in this quarter, although having a smaller revenue as compared to last year, they were able to beat all the estimates. One reason I believe this is very important is the fact that their forecasted EPS was estimated to be higher than the previous quarter which is the opposite for Target. Target’s EPS estimate is around 3.5 times less than what was expected of them in the last quarter. Although Target has a smaller market share than Walmart, in no way are they smaller by this significant amount. I believe that this will make it very easy for Target to beat the estimates. Adding furthermore, Home Depot, another company in the same sector was able to also beat the EPS which was around 30% higher than what they had originally reported last quarter. On another note, I decided to take a look at their website traffic to really see if their customer interactions are increasing or not. Ever since their last report, there have been around an extra 15 million customer visits to their website. This is great news as even imagining if 10% of those people decided to purchase something online, that's already a 1.5 million number increase on their online purchases. But looking at Home Depot, on the other hand, there has been a huge decline in their customer visits which even then, they were able to beat a reported estimate than last quarter. Target definitely has a bigger advantage here. Additionally, Target entered the second quarter with inventory up 43%. They reported in a release that it would take additional markdowns along with removing excess inventory and canceling orders to optimize their stock levels. Additionally, Target also said it is making rapid revisions to sales forecasts, promotional plans, and cost expectations by category. Target revised its Q2 down to an operating margin rate of around 2%, compared to previous guidance of within a range of 5.3%. While this might seem bad, I believe that they did the right thing by lowering the expectations for their report and setting a realistic estimate. Walmart also decreased their forecasted revenue growth today for the year and the investors didn’t show a reaction as it is up around 7%. UBS analyst Michael Lasser recently told clients that Target is likely to emerge much stronger after its second-quarter results than it did following its first-quarter disclosure. He went on stating “Target's multiple guidance cuts this year do not necessarily translate to doom and gloom for the stock,” he advised clients. “We believe Target is well positioned to capitalize on changing consumer behaviors and habits.” I believe what he says to be true as looking back at Target’s history, except last quarter, the last time they weren't able to beat the EPS was back in 2018. Disadvantages: Target has recently seen many downward revisions. This could be an indicator that they still haven’t recovered from inflation and are experiencing lower customer demand.
Initial reaction: Short Researched reaction: Long Top 10 Owners of Target Corp Stockholder Stake Shares owned Total value ($) Shares bought / sold Total change The Vanguard Group, Inc. 8.75 % 40,579,47 6 6,629,874,789 -762,034 -1.84% SSgA Funds Management, Inc. 7.71 % 35,757,06 0 5,841,988,463 -165,758 -0.46% BlackRock Fund Advisors 5.41 % 25,093,33 5 4,099,749,072 -789,497 -3.05% Capital Research & Management Co.... 1.86 % 8,619,070 1,408,183,657 -322,925 -3.61% Geode Capital Management LLC 1.71 % 7,921,740 1,294,253,881 -148,745 -1.84% Wells Fargo Clearing Services LLC 1.62 % 7,494,245 1,224,409,748 +22,630 +0.30% Columbia Management Investment Ad... 1.58 % 7,306,570 1,193,747,407 -383,799 -4.99% Massachusetts Financial Services ... 1.46 % 6,775,981 1,107,059,776 +5,759,168 +566.39 % Northern Trust Investments, Inc.(... 1.27 % 5,901,638 964,209,616 -532,625 -8.28% Norges Bank Investment Management 1.02 % 4,728,353 772,518,313 -641,428 -11.95% P/E Ratio: 15.3 Market Cap: 84,754,430,368 CEO: Estimate: +8%