UBS Remains Sidelined on Target (TGT) Following 3Q - PT to $78
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UBS reiterated a Neutral rating on Target (NYSE: TGT), and raised the price target to $78.00 (from $72.00), following the company's 3Q earnings report. While the retail backdrop remains challenging, UBS thinks that TGT's -1% to 1% 4Q comp guidance is achievable. It seems to have a competitive product lineup for the holidays. The 10% off promo it ran in Aug. provided a chance to test its systems in advance of the holidays. This should help it avoid any website overload issues similar to last year on Cyber Monday.
Analyst Michael Lasser commented, "Overall, TGT's -0.2% comp was better than initially feared. It topped the midpoint of its guidance & demonstrated sequential improvements on its multi-year stacks. Also, its digital growth accelerated to 26%. The overall outcome showed TGT is harvesting a return on the investments it's made over the years in areas such as merchandising & logistics. Though, we think some of the improvement can also be explained by a better environment in 3Q vs. 2Q. The avg comp at JCP, JWN, KSS, & M improved by 70 bps sequentially, & this basket has had a ~53% correlation w. TGT's comp since 1Q'15. Still, TGT still has some work to do. Its overall traffic was down -1.2%, the 2nd straight quarter that metric declined. Also, it sounds like TGT is seeing better trends around events & sales drop off in between. This could mean it's losing some of those regular trips to others in an increasingly mobile commerce world. We think this leads to a balanced risk-reward for TGT as its trading at a 14x NTM P/E (in line w. DKS & LOW)."
Shares of Target closed at $76.03 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS Change, Analyst PT Change
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