Bank of America downgrades this big-box retailer, cites margin and tariff pressures
Bank of America is moving to the sidelines on Target after the company’s earnings reflected an uncertain outlook. Analyst Robert Ohmes downgraded the big-box retailer to neutral from buy and lowered his price target on the stock by $40 to $105. The new target suggests roughly 12.9% potential upside for the stock, which is down 31% this year. Target shares slid 5% on Wednesday after the company cut its full-year sales outlook and posted weaker-than-expected first-quarter results. The retailer cited consumer uncertainty exacerbated by tariffs and backlash to the rollback of key diversity, equity and inclusion efforts for the weak report. “Despite valuation near 10-year lows, we see increased uncertainty as top-line weakness continues and the timing of comp recovery gets pushed out, with softer sales driving higher markdowns and thus incremental margin pressure for TGT,” Ohmes wrote in a note to clients, adding that Target is now “well underperforming peers” such as Walmart. “Longer term, we think that growth in high-margin businesses, such as marketplace and digital advertising, could support greater margin stability,” he continued. TGT 1Y mountain Target stock performance. Given Target’s softer sales and margin outlook, Ohmes lowered his 2026 adjusted earnings per share forecast. He anticipates continued margin pressure in the second fiscal quarter from markdowns as softer top-line trends continue. Tariff pressures should also weigh on margins, according to the analyst, although he said that could lessen against easier comparisons in the second half of the year. To be sure, Ohmes said that Target continues to see stronger trends in digital growth, seasonal events and brand collaborations, particularly its partnership with apparel brand Kate Spade launched in April. “We think that merchandising initiatives should support TGT’s newness and value perception over time,” Ohmes wrote. Of the 39 analysts that cover Target, 24 have a hold rating on the stock and 13 rate shares a buy or strong buy. They have a consensus price target that suggests roughly 25% upside ahead for the beaten-down stock.
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