Daniel Binder of Jefferies cut Target Corp. to "Hold" from "Buy" and reduced the price target to $59 from $74.
The analyst said in a client note that he anticipates that the chain had weak December sales at stores open at least a year. This figure is a key gauge of a retailer's health because it excludes results from stores recently opened or closed.
Binder forecasts these sales will be flat to up 1 percent for Target for December. The holiday shopping season is critical for retailers because it can account for up to 40 percent of their annual revenue.
Retailers will report their December results for stores open at least a year on Thursday.
Binder said that part of the problem Target had in December was that consumers shifted to making more of their toy purchases online and that the retailer didn't have enough inventory.
The analyst also believes that a collaboration with Neiman Marcus, where both retailers sold items by designers such as Marc Jacobs, Tory Burch and Jason Wu, fell flat. Binder said that he was hoping the partnership would drive sales and traffic, but said it appears that didn't happen. Both Target and Neiman Marcus have deeply discounted the merchandise.
Binder said that Target will face more difficult sales comparisons in January and for the first quarter, so he is lowering some sales estimates for the first quarter through the third quarter.
Shares of Target shed 26 cents to $58.91 in morning trading, one of Wednesday's rare decliners. Stocks shot higher, with the Dow Jones industrial average up 1.8 percent, in a rally triggered by the budget deal in Washington that averted the "fiscal cliff."