JPMorgan downgrades Target stock because of its high exposure to millennials and the upcoming resumption of student loan payments

• Target stock was downgraded by JPMorgan on Thursday due to its high exposure to millennials.
• The bank said the resumption of student loan debt repayments later this year could hurt the retailer.
• "We continue to believe that the consumer is broadly weakening while the share of wallet shift away from goods is ongoing," JPMorgan said.

Target's high exposure to millennial customers is a double-edged sword that could hurt the retailer as student loan debt repayments resume later this year, according to JPMorgan.

The bank downgraded the retailer's stock to "Neutral" from "Overweight" in a Thursday note as it highlighted the host of challenges Target is facing. JPMorgan also slashed its price target to $144 from $182. 

From recent "controversies" — as JPMorgan puts it, referring to conservatives threatening to boycott the company because of its Pride-themed merchandise — to a weakening consumer, Target has a lot of headwinds to navigate going into one of its busiest seasons of the year. And that opens the company up to a lot of risks.

"We continue to believe that the consumer is broadly weakening while the share of wallet shift away from goods... Target has been giving back [market] share on a one-year view and we believe this share loss could accelerate into back to school and linger into holiday given consumer pressures and recent company controversies," JPMorgan said.

The bank also highlighted that disinflation in the price of groceries, which account for about 40% of Target's revenue, is also a headwind for the company as it translates into lower revenues and same-store-sales growth.

Finally, JPMorgan said Target "over-indexes" to millennial customers, and that the company is more exposed than other retailers to the eventual resumption of student loan debt repayments.

Payments are expected to restart at the end of August after being paused since the pandemic, when student loan borrowers essentially began receiving a form of stimulus.

Meanwhile, the Biden administration's plan to cancel up to $20,000 in student loan debt is in front of the Supreme Court, with a potential decision being rendered by the end of June. The current majority of the Supreme Court is held by six conservative judges. 

"Said succinctly, we placed Target on negative catalyst watch into the first-quarter print on topline and margin concerns and came out of the quarter with second-half topline guidance concerns. Since then, the backdrop, from the consumer to share of wallet to disinflation has, in total, gotten worse with share/traffic risk rising into the most important quarters of the year. As such, the prospect for additional downward revisions is rising," JPMorgan said.