Target upgraded at HSBC as footfall points to turnaround gaining momentum

Investing.com -- HSBC analyst Joe Thomas upgraded Target to Buy and raised his price target for the stock to $190 from $125 per share in a note Wednesday, telling investors that a traffic-driven recovery is underway.

“Q2 results support the view that a traffic-driven recovery is underway,” wrote Thomas.

The analyst explained that the results provided strong evidence the turnaround is gaining momentum, with comparable sales rising 3.8%, including a 2.7% rise in store-originated sales, while underlying profits and EPS were around 5% ahead of consensus.

“Growth was driven primarily by footfall rather than higher ticket values,” added Thomas. “This indicates to us that Target is rebuilding customer traffic and that its store base is not being materially cannibalised.”

HSBC sees the “potential for earnings forecasts to be exceeded in the short and medium term." Year-to-date, the two-year comparable sales growth rate is 1.7%, noted HSBC, with the bank’s estimates requiring only 0.5% two-year growth in the second half to deliver its full-year assumptions.

“Shares look inexpensive if we include potential earnings upside,” concluded Thomas, with HSBC’s valuation based on an 18x multiple applied to its revised FY27e EPS estimate of $10.61, in line with Target’s five-year average historical PE multiple.

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