If you’re like many people in the U.S., you visit your local Target (TGT -0.30%) store at least once in a while for necessities. The company runs one of the busiest and most successful retail networks in the country, and a recent recovery from certain post-pandemic managerial stumbles has made its stock popular again.
Still, in the view of several stock analysts, Target remains undervalued. Let’s put one under the microscope and explore his reasons for thinking the retailer’s shares have more room to run.
An upgrade and a price target lift
The prognosticator in question is European lender Deutsche Bank‘s Paul Trussell. In early March he upgraded his recommendation on Target from hold to buy. In doing so he also made quite the substantial raise to his Target price … erm, target. He now believes the stock is worth $206 per share, which is well above his previous $149 level. That represents 23% upside from Tuesday’s prices around $168.
Trussell’s change in view was due to a number of green lights he saw flashing for the retailer. To him, the company is taking clever and well-considered measures to boost its revenue, with moves such as expanding its “value assortment” by continuing to partner with well-known designers (Diane van Furstenburg is a current example).
He’s also cheered by a new loyalty offering that should bring customers back to the stores more effectively, in addition to a membership program poised to win adherents that like receiving goodies. What’s more, Target aims to open 300 or so new stores over the coming decade, a figure that will add substantially to its sales volume and overall consumer foot traffic.
From strength to strength
With moves like that, Target is continuing to add to its considerable strengths. Analysts are collectively modeling a 5% rise in per-share net income in 2024, then a 12% leap in 2025. Zooming ahead further in time, the five year PEG ratio is a still-low 1.3 just now. Given all that, Target seems clearly undervalued and a stock worth owning.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Target. The Motley Fool has a disclosure policy.
