KeyBanc thinks a resumption in student loan repayments in the third quarter will slam Target’s margins. The firm downgraded Target on Sunday to sector weight from overweight. Target’s stock is down nearly 11% from the start of the year and more than 19% over the past three months. The company’s latest quarterly results showed Target struggled to grow sales year over year. Executives also signaled sales for future quarters would remain stunted. TGT YTD mountain Target has been hit by a concerns over a weakening consumer that’s cautious to overspend. And analyst Bradley Thomas said a more cautious consumer that’s more keen on budgeting coupled with macro headwinds will hinder Target’s long-term recovery — especially as student loan payments resume later this year . “Given the recent selloff in shares, we believe NT [near-term] downside may be limited, but we see the growing risk of student loan payments as likely pushing out the margin recovery story at least another year, thus pushing us to downgrade,” Thomas said. Thomas added that Target executives’ restating of lukewarm guidance on its earnings call may be a strong sign that the company will struggle to recover as well as peers on the consumer space. “We believe downside risk may be elevated for TGT, relative to competitors, due to the Company’s decision to reiterate guidance while sales and margin headwinds continue to intensify for the broader retail environment,” he said. — CNBC’s Michael Bloom contributed to this report.
