11:23 AM EDT, 08/14/2024 (MT Newswires) -- Target ( TGT ) may end up closer to the lower end of its projected earnings per share range for the year or even reduce it due to the slow economy and potentially weak trends in Q3, Morgan Stanley said in an earnings preview.

The company said it continues to expect full-year 2024 adjusted EPS in the range of $8.60 to $9.60 per share after posting its Q1 results in May.

The analysts said in a Tuesday note that at the start of the year, they expected Target ( TGT ) to grow sales and expand margins, leading to higher EPS in 2024. However, with weaker margins and a softer consumer environment, the focus now is on whether earnings before interest and tax margins will bottom out in 2024 and set the stage for growth in 2025 and 2026.

"Slowing consumer discretionary spending, particularly in June and July, is weighing on retailer Q2 results and H2 outlooks. We think Target ( TGT ) is in the crosshairs of this dynamic," the analysts said, adding that their analysis suggests a possible new EPS range of $8.30 to $9.10, which is about 4.5% lower than the original midpoint.

If EPS grows 10% annually in 2025 and 2026, it could reach $9.57 and $10.53, and by 2026, using a 14x valuation multiple, the stock could theoretically hit about $147, offering around 10% upside. However, if Q3 sales trends are weaker than expected, the stock could face more challenges, the analysts said.

Morgan Stanley has an overweight rating on the company's stock with a price target of $180.

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