Target has been on fire this year. HSBC sees more upside ahead
Investors should scoop up shares of Target as the company’s outlook continues to improve, according to HSBC. Analyst Joe Thomas upgraded the retailer to buy from hold and raised his target price on the stock to $190 from $125. That implies nearly 20% upside from Tuesday’s close. Thomas called Target’s sales for the second quarter a “stand-out”, highlighting comparable sales rose 3.8% and store originated sales gained 2.7%. The company said it had consistent sales across income demographics too, according to the HSBC note. “Year-to-date, the two-year comparable-sales growth rate is 1.7%, while our estimates require only 0.5% two-year growth in the second half to deliver our full-year assumptions. So, it looks as though Target could comfortably surpass our expectations,” Thomas wrote in a Wednesday note to clients. TGT YTD mountain TGT year-to-date. Beauty, food and beverage and household essentials had notable recoveries he said. Apparel and home furnishing saw limited growth, but HSBC has a positive outlook still, with Target’s back-to-school apparel growing in the double digits. “We think this is encouraging and suggests that store base sales are not being unduly [cannibalized], as might be happening at some other retailers.,” Thomas wrote. A change in the U.S. trade landscape is also helping. The Supreme Court struck down out a large portion of President Donald Trump’s tariffs. Thomas noted that may lead to a $994 million refund for Target. HSBC also noted Target is sharpening its marketing and is investing over $2 billion incrementally to “elevate the in-store guest experience” as part of the company’s recovery program to increase foot traffic. Most analysts have a tepid view of Target. Of the 39 who cover the stock, 24 rate it as a hold, while another three assigned an underperform rating, LSEG data shows. The remaining 12 have buy or strong buy ratings. Target shares are up 62% this year following four straight annual declines. The stock is on pace for its best yearly performance since 2019, when it jumped 94%.
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