Shares of Target (TGT) are in focus in morning trading after an analyst upgraded the stock to Outperform, citing improved execution, easier sales comparisons and exclusive brand launches.
ANALYST UPGRADE: Baird analyst Peter Benedict upgraded Target to Outperform from Neutral and raised his price target on shares to $85 from $75. In a note to clients, Benedict said he was adopting a “more bullish stance” on shares for the year following recent signs of improved execution ahead of “several identifiable top-line catalysts.” Benedict said that better than expected comparable sales should help narrow Target’s “still-meaningful” valuation gap versus the overall market and rival Walmart (WMT). He believes that in addition to easy comparisons in the first quarter, Target’s accelerated remodels, additional exclusive brand launches, and emerging convenience-oriented fulfillment options will serve as catalysts this year. He sees more room for the shares to run following the 13% year-to-date rally. Looking to Target’s March 6 investor meeting, Benedict predicted a “heavy” focus on its latest initiatives, like the remodels and exclusive brand launches, which he said could further improve the narrative around the stock.
RECENT GUIDANCE: In January, Target said that comparable sales for the combined November/December period grew 3.4%, which was better than the company previously said that it expected. Additionally, Target raised its FY17 earnings view and said it is currently planning for a low single-digit increase in its 2018 comparable sales and “year-over-year stability in EPS generated by its core business.” Other companies in the retail space that also reported strong sales for the critical holiday season include Kohl’s (KSS), Macy’s (M) and J.C. Penney (JCP). Target also sees Q4 adjusted EPS of $1.30-$1.40, above its previous estimates of $1.05-$1.27. For 2018, Target sees adjusted EPS of $5.15-$5.45, well above analysts’ consensus of $4.37 at the time.
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