Is Bill Ackman Going to Save Target (TGT) Stock?

Source: jejim /

Shares of Target (NYSE:TGT) stock have fallen by over 15% after the retailer reported its first-quarter earnings. For the quarter, revenue tallied in at $25.32 billion, up by 0.6% year-over-year (YOY) and beating the analyst estimate of $25.29 billion. On top of that, the company’s EPS of $2.05 came on top of the estimate of $1.76.

TGT shareholders responded negatively to a 3.4% drop in comparable digital sales, a small increase in comparable store sales, organized retail theft, and competition from Walmart (NYSE:WMT). The store also received backlash for its positioning of LGBTQ+ Pride merchandise. TGT is currently trading in the mid-$130s range compared to its 52-week low of $125.08.

Despite this, TGT stock is up almost 4% today on some intriguing but speculative activist investor news.

Today, an Activist Insight report circulated throughout the web, stating that Target was vulnerable to an activist investor. Let’s get into the details.

TGT Stock Mentioned as Vulnerable to Activist Investor

InvestorPlace was unable to obtain a copy of the report, although SeekingAlpha noted that the report name-dropped Bill Ackman, who once had an interest in the company in 2009. Furthermore, Insightia’s Vulnerability analysis shows that Target is in the 67th percentile of companies that are likely to be targeted by an activist investor.

SeekingAlpha added:

“An activist may argue that inventory issues at Target that have plagued the company recently should be addressed with new board or management oversight. An investor could also push for focusing on improving operating margins and stock buybacks.”

Target’s operating margin for Q1 was 5.2%, which is still below pre-pandemic levels. Inventory at the end of the quarter was 16% lower YOY, while discretionary category inventory was lower by over 25%.

As of now, an Ackman investment in TGT stock should be seen as pure speculation. Still, the fund manager is known for scooping up retail brands in his portfolio. As of Q1, Pershing Square’s largest 13F positions were Lowe’s (NYSE:LOW), Chipotle (NYSE:CMG), and Restaurant Brands International (NYSE:QSR). In total, the fund owns just eight 13F positions with an assets under management (AUM) of $10.21 billion.

Following its earnings, Target received a slew of price target downgrades. For example, Baird lowered its target to $190, while Truist Securities lowered its target to $157. Still, its worth noting that TGT carries an average price target of $175.50 among 31 analysts, which reflects a significant upside.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. 

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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