By Senad Karaahmetovic
A Wells Fargo analyst upgraded shares of Target (NYSE:TGT) to Overweight from Equal Weight with a price target of $195 per share, up from the prior $155 a share.
He says Target offers “an underappreciated earnings recovery at the right price,” hence the opportunity to get on the long side given the selloff in shares (down c30% YTD).
The analyst outlined 4 key factors behind his upgrade call:
“1) The company deserves some criticism for its inventory missteps, but it's not alone (ahem...WMT) and management's decisive action should help protect pandemic share gains (the real prize at the end of the day). 2) TGT took the earliest and biggest margin hit in retail, suggesting relatively lower risk from here and a faster recovery. 3) Investors seem too pessimistic on recovery earnings; we see EPS of $12.70 when the dust settles in 2023 vs. a buy-side bar that seems closer to $11. 4) Favorable risk/reward,” he wrote in a client note.
Besides the $195 per share price target, the analyst also set a $220 bull case. The new price target implies an upside of about 20%.
Target shares are up about 2% in premarket Monday.