On Thursday, UBS adjusted its outlook on Target Corporation (NYSE:TGT) by raising the price target to $200 from the previous $185 while keeping a Buy rating on the stock. The firm's analysis followed Target's second-quarter results, which they viewed as a significant step towards reinforcing the positive perspective on the company's shares.
The report from UBS highlighted several key aspects of Target's performance, including a surge in customer traffic, robust gross margin improvements, and an uptick in other income, attributed partly to a double-digit increase in advertising revenue. Additionally, the reinstatement of share repurchases was seen as a positive move.
According to UBS, the future for Target looks promising, with the potential for both earnings estimates and the stock's price-to-earnings (P/E) multiple to climb. The retailer's stock has been trading at a P/E ratio in the 15x-16x range based on the market's estimates for 2025, which is below its five-year average of approximately 17x.
UBS emphasized the importance of consistency for Target to achieve a higher valuation, noting that the retailer's stock has suffered in the past due to perceived volatility in its performance, largely attributed to its substantial discretionary product mix. The firm suggested that building on the momentum from this quarter could lead to sustained improvements.
The second-quarter report was described as filled with encouraging data points that could signal a return to consistency for the company, which UBS believes could drive the stock's multiple towards the higher end of its historical 12x-18x range. The analysis concluded with a positive outlook on Target's recent financial outcomes.
In other recent news, Target Corporation has seen several notable developments. BofA Securities raised its price target for the company to $195, citing a strong second quarter and expected sustained gross margin strength. The company's earnings per share (EPS) estimate for fiscal year 2025 has been adjusted to $9.70, up from the previous $9.45 estimate. RBC Capital also increased its price target for Target from $174 to $177, maintaining an Outperform rating and anticipating sales growth of 0.4% and 1.5% for fiscal years 2024 and 2025, respectively.
Morgan Stanley (NYSE:MS) reaffirmed its Overweight rating on Target's stock, citing strong growth potential and the company's ability to regain market share. Meanwhile, Evercore ISI raised its price target for Target to $160, noting an uptick in customer traffic and improved profit margins. The firm projects Target's earnings per share could reach $9.50 in 2024 and increase to $10.50 in 2025.
Despite these positive projections, a major financial firm raised its price target for Target to $157 from $153 while maintaining a Neutral rating, expressing a cautious outlook due to a slowdown in the e-commerce business. Wells Fargo (NYSE:WFC) also revised its financial outlook on Target, raising the price target to $180 from $160, highlighting Target's potential as a long-term share gainer.
InvestingPro Insights
Following UBS's optimistic outlook, InvestingPro data also provides a compelling snapshot of Target Corporation's (NYSE:TGT) financial health. The company's market capitalization stands at a robust $73.51 billion, with a forward-looking P/E ratio of 14.91, suggesting that the stock may be undervalued relative to near-term earnings growth. This aligns with the UBS assessment that Target's P/E multiple has room to grow. Moreover, the company has demonstrated a significant return over the last week, with a 13.3% price total return, indicating strong recent performance that may interest investors looking for momentum.
In addition to these metrics, an InvestingPro Tip highlights Target's impressive history of dividend reliability, having raised its dividend for 54 consecutive years, which could be a key consideration for income-focused investors. Furthermore, the company's PEG ratio, which stands at 0.35 for the last twelve months as of Q1 2025, suggests that Target's stock price is potentially undervalued based on its earnings growth rate.
InvestingPro also lists several additional tips for Target, providing deeper insights into the company's financial status and market position. For those interested in exploring these further, more tips can be found on the InvestingPro platform, including an analysis of the company's debt level, liquidity, and profitability predictions for the year.
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