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Where Target Stock Could Be Heading

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Still scope for upside?

Shares of Target Corporation (TGT) are up 23.1% YTD (year-to-date) as of April 4 and have outperformed the broader markets. The S&P 500 is up 14.9% so far this year. In comparison, shares of Costco (COST) and Walmart (WMT) are up 20.0% and 5.3%, respectively, YTD, reflecting strong comps. However, a weak financial performance has dragged Kroger (KR) stock down. KR has fallen 13.9% so far this year.

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Target stock benefited from the company’s healthy comps growth. Meanwhile, its lower tax rate drove its earnings higher. We expect Target to continue to drive comps despite tough year-over-year comparisons, reflecting the expansion of digital fulfillment options, store remodelings, and expanded assortments.

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Meanwhile, Target’s bottom line is expected to mark high-single-digit growth in 2019 driven by an increase in comps, lower interest expenses, and share repurchases.

Despite rising ~23% this year, Target stock is trading at a forward PE multiple of 13.9x, which is well below Walmart’s (WMT) and Costco’s (COST) forward PE multiples of 20.6x and 30.1x, respectively. However, a slowdown in its growth rate owing to tough comps could restrict Target stock’s upside.

Rating and target price

Nine analysts have given Target stock “buys,” 16 have given it “holds,” and one has given it a “sell.” Analysts’ consensus target price of $85.01 on the stock implies a potential upside of 4.5% based on its closing price of $81.38 on April 5.

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