Target's Stock Just Seriously Plummeted. Here's Why

It seems no retailer is safe as the stocks of some of the largest companies in the United States continue to plummet, according to Investor's Business Daily. First, it was Walmart on Tuesday. Wall Street reported the mammoth company did not meet its earnings per share (EPS) target. After first-quarter earnings, Walmart's stock was at $1.30 per share, $0.18 less than the expected $1.48 per share. However, their $141.57 billion revenue was well-above their calculated desired earnings of $138.8 billion. The multinational retail corporation blames its undesired results on costs to hire and rising costs within their supply chains due to the war in Ukraine.

Now, Target is also facing the wrath of rising inflation. Yahoo News reported that Target's stock hasn't plummeted this far since 1987, after the Black Monday crash. Similar to Walmart, Target believes its shortcomings are a result of having to pay higher costs for operations such as transporting goods.

Investor's Business Daily reported Target was expected to earn $3.07 per share but ended up only earning $2.19 a share instead. Today, Target's stock fell 25% to below 162 — a low that hasn't been seen for the past 18 months. However, Target did see a 4% rise in revenue to $25.17 billion, same-store sales also rose by 3.3%, and in-store sales saw a 3.4% increase, with their digital store surprisingly only climbing up to 3.2%.

An ESP that is lower than expected or seen as steadily decreasing is a frightening thing for a company. Elearnmarkets says this makes the stability of the company look poor and reduces the confidence of their shareholders as they receive a lower return. This also provides a frightening outlook on the company's future growth potential. When earnings are lower than expected, it can also prevent future investors from buying your company's stock options. One reason for lower ESP is if the company's profit has decreased, and they are not using their savings proficiently.

Target believes their unexpectedly low profit is a result of higher costs to ship their goods, according to Investor's Business Daily. The increasing price of transporting goods can be related to the increase in gas prices as a result of the war between Russia and Ukraine. Financial Review explained countries have sanctioned Russia because of the war they declared on Ukraine; now, several countries are unable to purchase oil from the world's second-largest oil producer, meaning they must purchase oil elsewhere at a higher cost.

Target has also had to mark down items significantly to attract buyers whose earning potential is not matching the same speed as inflation. They also didn't sell many of their profitable items, such as TVs. Cowen analyst Oliver Chen explains that Target may be in a stickier situation than Walmart, as it could suffer higher consequences during a potential recession due to the fact it doesn't sell groceries as much as Walmart does.

Fortune reported that stocks are expected to continue falling. The top 500 countries have seen a 16% year-to-date decrease in stock, revealing six weeks of losses that the stock market hasn't experienced since 2011. According to experts, stocks are expected to continue decreasing by 15%. However, the S&P index is expected to recover up to 3,900.

Chief U.S. Equity Strategist Michael J. Wilson says that the likelihood of a recession has increased. A recession is possible by 2023, especially if current inflation trends continue to follow through the next year. For the rest of 2022, it's wise to not get your hopes up. Earnings are expected to stay low, especially as the growth of the U.S. economy has been noted to decrease by 1.4% in the first quarter. As the impact of the COVID-19 pandemic continues to determine the pattern of consumers, the U.S. is at a 30% risk of falling into a recession, according to Yahoo Finance.