UPDATE 1-RESEARCH ALERT-Goldman Sachs cuts Target to neutral

Nov 18 (Reuters) - Goldman Sachs downgraded Target Corp (TGT.N) to "neutral" from "buy," and removed the retailer from its Americas conviction buy list, saying aggressive promotional activity and pricing competition from rival Wal-Mart Stores Inc (WMT.N) could hamper margins.

"Gross margin upside could be tempered, given a more aggressive Wal-Mart, expenses are coming in above our prior expectations, and credit delinquencies are likely to tick higher, given current delinquency trends," Goldman Sachs analyst Adrianne Shapira wrote in a note dated Nov. 17.

Whether or not Wal-Mart's Thanksgiving Day and Black Friday promotional efforts prove successful, they are likely to pressure competitors' sales and margins, the analyst said.

"We expect intensified price competition from Wal-Mart beginning in the fourth-quarter and into fiscal 2010," Shapira said.

Shapira said there is also less fourth-quarter upside opportunity for Target, as the company laps excessive labor expense cuts last year, which it does not expect to repeat this year.

Goldman Sachs added Cheesecake Factory Inc (CAKE.O) to its Americas conviction buy list, replacing Target within the consumer retail business space.

Shares of Target were down 2 percent, while Cheesecake shares rose more than 3 percent in premarket trade on Wednesday. (Reporting by Viraj Nair in Bangalore; Editing by Anil D'Silva) ((viraj.nair@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5800; Reuters Messaging: viraj.nair.reuters.com@reuters.net))