Goldman Sachs maintains Target (TGT.US) “neutral” rating: Q4 core indicators are weak, and the results of the strategy remain to be seen

The Zhitong Finance App learned that Goldman Sachs released a research report to maintain Target (TGT.US)'s “neutral” rating, and the target price for 12 months was set at 97 US dollars. The report points out that although some investors are optimistic about its valuation advantage and potential for a lower performance comparison base, the bank believes that the performance of many of the company's core business indicators since the fourth quarter has been weak, and it will take time to observe the results of the new management's strategic adjustments.

The bank said that Target has recently faced multiple business challenges. On the consumer demand side, Google search trends showed that the popularity of searches in the fourth quarter (November-December) continued to be lower than the previous two years, and there was no significant boost even during the Black Friday shopping season; Placer's monthly in-store traffic data showed a 4.4% year-on-year decline since December, although improving from the February trough, but still in a negative growth range; Bloomberg Alternative Data showed that the company observed a 6.8% year-on-year decline in sales after adjustment in the fourth quarter, further deteriorating from -2.6% in the third quarter.

Consumer confidence indicators are also not optimistic. According to HundredX data, Target's net recommended value (NPS) and net purchase intention (NPI) rebounded in stages after hitting a three-year low in early May, but recent improvements have slowed down, and NPS has even declined in some weeks. As of December 15, its NPI was -7.2% and NPS was 27.8. Both indicators were significantly below historical normal levels. Furthermore, according to Sensor Tower data, although the number of monthly active users (MAU) increased 1.6% year over year in November, the company's app downloads fell 13.5% year over year.

At the operational level, Target also experienced short-term twists and turns. On December 19, the company's app and website experienced intermittent outages for several hours, affecting the fulfillment and tracking of online orders. Although the issue was completely fixed the next day and $20 gift cards were issued to affected users, it still had a certain impact on peak season sales. At the same time, Goldman Sachs mentioned that aggressive investor Toms Capital has purchased shares of an undisclosed scale in Target, and changes in the shareholding structure have added uncertainty to the company's future development.

It is worth mentioning that Target appointed Michael Fiddelke, the former chief operating officer, as the new CEO in August. Goldman Sachs said it will continue to pay attention to the new management's specific initiatives in terms of business optimization and investment strategy adjustments. Recently, the company has begun to invest more in store experience. Goldman Sachs confirmed related investment actions through field visits to Westbury and Soho stores, but this has not yet been translated into obvious operational improvements in the short term.

Goldman Sachs concluded that although Target reset its earnings guidance for fiscal year 2025 when it released its first-quarter earnings report in May, the company's same-store sales trend needs to show signs of improvement if it is to shift to a more positive view.