Shares of Target Corp (NYSE:TGT) tanked in early trading on Monday, continuing their downward trajectory after a customer backlash and calls for a social media boycott.

While Target's long-term margin recovery story remains intact, the company could face increasing consumer headwinds over the next 12 to 18 months, including student loan payments, according to KeyBanc Capital Markets.

The Target Analyst: Bradley Thomas downgraded the rating for Target from Overweight to Sector Weight.

The Target Thesis: The approval to raise the government's debt ceiling is accompanied by a policy change to resume student loan payments after Aug. 30, which could be a "sizable headwind" for discretionary spending, "particularly for the 2023 back-to-school and Holiday Season," Thomas said in the downgrade note.

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"Ultimately, we believe this presents TGT with additional downside risk due to the retailer's elevated discretionary sales mix (51.2% in 2022) and core consumer demographic (younger, college educated)," the analyst wrote.

The consensus estimates appear "too high" in view of these emerging headwinds, Thomas stated. "Given the recent selloff in shares, we believe NT 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," he added.

TGT Price Action: Shares of Target had declined by 1.97% to $130.60 at the time of publishing Monday.

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