CNBC's Cramer Favors Wal-Mart Now Over Target

CNBC’s Jim Cramer, who has long urged investors to buy Target and forget Wal-Mart, reversed his position on both stocks.

“I think the risk-reward has changed dramatically here,” Cramer said during an appearance on "Squawk on the Street."

Target's shares fell sharply Tuesday after the retailer said April sales at established stores would be "much weaker" than an earlier forecast.

Target said it now anticipates same-store sales -- a key measure of retail performance that measures sales at stores open at least a year -- to rise between 3% and 4% for the combined March-April period, below an earlier forecast for a rise of 4% to 6%.

The shares of Target's bigger rival, Wal-Mart,also fell on the news.

Cramer, meanwhile, said the addition of Allen Questrom to Wal-Mart’s board is “major.”

“He’s the chief architect of J.C. Penney’s (move) from being dowdy to smart,” Cramer said. “To let him in is a sign of Wal-Mart saying, ‘We don’t know what do to, Allen -- help us.’ Meantime, I don’t know if I want to be in Target here vs. Wal-Mart. I’m changing my mind right here on ‘Squawk on the Street.’”

Cramer does not own either stock.

Earlier this month, Target said it expected April same- store sales to fall 2% to 4% due to the earlier timing of Easter. Target's March same-store sales -- a period that included pre-Easter shopping -- rose 12%.

ThinkEquity analyst Ed Weller wrote in a research report the lowered forecast "appears to suggest an April (same-store sales) decline in the range of 8% to 9%." Last April, Target posted a same-store sales increase of 10.4%.

The company said on Monday that same-store sales were expected to rise 4% for the first quarter.

It also said that first-quarter earnings-per-share growth would be consistent with an earlier outlook for the full year. In February, it said the average analyst profit estimate of $3.60 per share was within the range of "likely outcomes" for its current fiscal year and repeated that view earlier this month.

As of Monday, analysts were expecting Target to post full-year earnings of $3.61 per share, excluding items, according to Reuters Estimates.

Target shares closed on the New York Stock Exchange at $61.43 and fell over 3% to $59.52 in extended trading. Wal-Mart shares closed at $48.93 and fell 40 cents to $48.53 after hours.