What goes up must come down. Or at least some analysts are beginning to think so for Target (TGT) stock, dividing opinion on the street.
Target has posted another quarter of strong growth, bolstered by a 41% rise in its e-commerce business, following the trend of other brick and mortar retailers expanding their digital presence. But the meteoric rise has analysts wary of a pullback.
Target shares were up more than 3% to nearly $86 just minutes before Wednesday's close. They were trading at $67.63 at the beginning of 2018.
"We recognize TGT is delivering on its top-line initiative, but believe the second half guidance is potentially aggressive, particularly given elevated competition and promotions across the industry in the fourth quarter," Morgan Stanley analyst Simeon Gutman wrote in a note today.
Gutman rated the stock underweight, with a price target of $70, speculating that this could be the peak for the retailer.
Deutsche Bank research analyst Mike Baker was likewise cautious, issuing a hold rating and a price target of $80, also below the mid-day price significantly.
"Flow through was not great with EBIT growth of just $40 million versus sales growth of $1.14 billion," he explained. "This implies an incremental margin of 3.5%."
Baker also noted the retailer's aggressive posture as a growing concern as the company continues to set higher bars for itself.
"The same store sales bar has now been set higher, making incremental beats from here more difficult," he concluded.
Real Money's own James "Rev Shark" DePorre also noted that there is concern over the stock falling back down to earth in a similar fashion to its competitor Walmart (WMT) , which shot up over $100 per share after a strong earnings release only to settle around $95 this week.
He suggested selling the stock at this point and waiting for a more amenable entry point.
However, not all analysts were so wary.
Seth Sigman, a research analyst at Credit Suisse, was optimistic on the prospect of the retailer continuing its rise.
"The results should help instill confidence in 2H outlook and TGT's ability to sustain growth even as comparisons get more difficult," he wrote in a note today. "We see TGT stock rising, with signs of higher EPS, balanced omni-channel growth and cheap relative valuation."
As such, he advised an outperform rating for the stock.
Even still, he was not the most aggressive analyst, as both Baird analyst Peter Benedict and Bank of America analyst Robert Ohmes raised their respective price targets to $100 from the previous $90 on the back of the earnings presentation this morning, citing confidence in continued momentum.
As the retailer continues to beat estimates quarter over quarter, analysts are beginning to separate on their forecast for the stock.
Just as Target CEO Brian Cornell divided the retail industry into winners and losers, so too will analysts be divided based on the second half for Target.