On Wednesday, BMO Capital Markets adjusted their outlook on Target Corporation (NYSE:TGT), raising the price target to $170 from the previous $145 while maintaining a Market Perform rating on the shares.
The firm's analysis highlighted Target's significant gross margin percentage improvement, which supported fiscal 2024 earnings per share (EPS) surpassing initial expectations despite weaker comparable store sales.
The retailer's management has set a fiscal 2025 EPS growth target in the mid-to-high single-digit percentage range, excluding the impact of an extra week, with continued high single-digit percentage EPS growth expected thereafter. This outlook is bolstered by the introduction of Target's new membership offering, Circle 360.
However, BMO Capital expressed caution, citing concerns that achieving top-line growth might entail higher costs than anticipated due to factors such as lean inventory management, a shift in sales channel mix, and intensifying competition in same-day service offerings from other retailers.
Target's strategy includes an aim to return to a 6% EBIT (earnings before interest and tax) margin. BMO Capital's revised price target of $170 is based on 17 times the firm's increased fiscal 2026 estimated EPS, which is expected to grow at a high single-digit percentage year over year.
Despite the raised price target, BMO Capital has chosen to maintain a Market Perform rating on Target's stock, signaling a neutral stance on the company's investment potential at this time.
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