Target (TGT) Estimates, PT Raised at Morgan Stanley But Fundamentals Not Stellar

Morgan Stanley analyst Simeon Gutman raised her price target on Target (NYSE: TGT) to $66.00 (from $61.00) following better Q3 results and momentum but retained an Underweight rating.

"Target is performing better than expected, with improving sales and solid expense control as the all important Q4 approaches," Gutman writes.

That said, the analyst said the company's fundamental picture is not stellar. "US EBIT dollars were down 5% as margins contracted 40 bps and the EBIT loss in Canada was north of $200 million. Gross margins were in-line with guidance but were still down 80 bps on a two-year stack, consistent with Q2. Excluding Canada earnings (which the market seems to be doing), TGT could earn $4.75
next year. With a 15x multiple, TGT could be a ~$70 stock. In an even stronger upside scenario, the US earns $5.15 and with a 16x multiple the stock could be worth $82. That's the upside risk from here. For now, we acknowledge that its all about directional improvement which is happening and should continue into Q4."

The firm raised FY Q4 EPS from $0.90 to $1.23. The firm also raised FY 2016 EPS from $1.29 to $1.44.

For an analyst ratings summary and ratings history on Target click here. For more ratings news on Target click here.

Shares of Target closed at $71.51 yesterday.

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