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Why Baird Upgraded Target Stock

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Baird upgrades Target to “outperform”

On Wednesday, Baird upgraded Target (TGT) to “outperform” from “neutral” and raised its price target by approximately 13% to $85 per share. Analyst Peter Benedict remains upbeat on the prospect of Target thanks to its improving fundamentals driven by store remodeling, new and exclusive product launches, and thriving digital sales backed by a strengthened delivery platform with the acquisition of Shipt. Plus, the analyst expects consumer spending to rise driven by personal tax reform, which should boost sales.

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Along with Baird, Susquehanna and Barclays also upgraded their ratings on Target stock as the recently enacted Tax Cuts and Jobs Act is likely to boost the company’s earnings growth, thus allowing it to pursue growth initiatives and strengthen its competitive positioning. Meanwhile, improving sales driven by its e-commerce arm, exclusive product launches, and store remodeling also remain positive factors for the company.

Given the company’s improving fundamentals, multiple analysts also raised their price target on TGT stock as reflected in the graph. The company’s peers including Walmart (WMT) and Costco (COST) are also expected to gain from the tax reform bill. Their core businesses remain strong, while the benefits from lower taxes are expected to provide additional ammo to fortify their competitive positioning against Amazon.com (AMZN) through reinvestments in the business. Citing benefits from lower corporate taxes, Goldman Sachs upgraded Walmart stock.

Rating summary and target price on TGT

The majority of analysts covering TGT stock maintain a neutral view, as increased competition and business reinvestment needs could hurt the company. Of the 27 analysts covering the stock, 67.0% suggest a “hold,” 22.0% recommend a “buy,” and 11.0% maintained a “sell” rating. Moreover, Target stock closed at $75.35 on February 14, 2018, which is on par with the analysts’ price target.

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