CFRA Research has upgraded Target (NYSE:TGT) to Buy from Hold and lifted its 12-month target price to $176 from $160, reflecting a positive outlook for the retailer's performance in the upcoming quarters.
This upgrade is based on an anticipated positive inflection in comparable sales starting in the second quarter of fiscal year 2024.
"We see comp sales inflecting positive in FQ2 (+1.2%) and accelerating in the second half of this fiscal year (+3%), due to strengthening store traffic as a result of recent value offerings, price cuts, and fresh/new assortment," CFRA analysts noted.
This positive trend is expected to be driven by a combination of strategic initiatives and market conditions that favor Target's growth trajectory.
A key factor in Target's anticipated performance boost is its revamped loyalty program.
CFRA highlighted the potential impact of the Target Circle 360 membership, stating, "We also believe TGT's revamped loyalty program, including the recent launch of the Target Circle 360 membership, can drive comp sales upside." This new loyalty initiative is expected to attract more customers and increase sales.
While there are some margin risks due to ongoing wage pressures and investments in price and the Target Circle 360 program, CFRA believes these challenges can be mitigated.
"There is some risk given ongoing wage pressures and investments in price and Target Circle 360, but we think these headwinds can be more than offset from shrink initiatives, lower freight costs, and other cost savings measures," analysts noted.
They also emphasized the long-term growth potential of Target's retail media business, Roundel, which they believe is currently underappreciated.
CFRA has raised its FY 2025 EPS estimate to $9.76 from $9.44 and its FY 2026 estimate to $10.95 from $10.52. The firm's optimism is underpinned by Target's ability to navigate current market challenges while capitalizing on growth opportunities, suggesting a robust outlook for the retailer.