generic Target Falls After Cutting Guidance
Key Insights
Target released an updated 2022 plan and cut its guidance.
Second-quarter results will look bleak, and the company’s operating margin rate will drop to just 2%.
The stock is trading at 11 forward P/E, but it is not too cheap as analyst estimates will decline in the upcoming weeks.
Target Cuts Guidance Again
Shares of Target found themselves under pressure after the company cut its guidance just a few weeks after the release of a disappointing earnings report.
Target announced that it planned to “right-size its inventory for the balance of the year and create additional flexibility to focus on serving guests in a rapidly changing environment.”
As a result, Target expects that its second-quarter operating margin rate will be in a range around 2%. Previously, Target expected that its operating marging rate would be in a wide range centered around 5.3%. In the second half of the year, operating margin rate is expected to grow to 6%.
Put simply, Target’s second-quarter results will look bleak. In addition, the market is worried that the economic situation is worse than previously expected due to inflation.
What’s Next For Target Stock?
Analyst estimates have moved lower after the disappointing first-quarter report. Target is expected to report earnings of $10.6 per share in the current fiscal year and $13.3 per share in the next fiscal year, so the stock is trading at 11 forward P/E.
While current valuation levels are not expensive, traders should keep in mind that analyst estimates will continue to move lower after another gudiance cut.
More, recent news from various firms, including Tesla, signal that the economy may face problems in the second half of this year. In this light, it remains to be seen whether the market will believe that Target’s problems will be limited to the second quarter and that the company would get back to planned operating margin levels in the second half of the year.
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This article was originally posted on FX Empire
