DA Davidson raised Target’s price target, citing stronger margins, sales trends and execution.

  • DA Davidson’s increased price target suggests a 16% upside for Target. 
  • The firm noted that Target’s margins have improved 140 basis points from their Q1 2023 low. 
  • CEO Michael Fiddelke highlighted 3.6% traffic growth and price cuts on more than 10,000 products. 

Target Corp. (TGT) stock is heading for its fourth straight week of gains, with DA Davidson throwing a fresh spotlight on the retailer after its fiscal second-quarter (Q2) earnings. The firm raised its price target while maintaining a Buy rating, citing stronger margins, solid comparable sales and improved execution as key drivers of further upside. 

Target’s Sales Trends Show Improvement

DA Davidson lifted its price target on TGT to $185 from $170 while maintaining a ‘Buy’ rating, implying a 16% upside to the stock’s last close. The firm said Target has made progress across several parts of its business, including inventory controls, logistics, store-level performance and order fulfillment.

Target’s comparable sales have improved for two straight quarters, giving analysts more confidence that the retailer’s recovery can continue as it improves its operations and execution. Profitability has also moved in the right direction. DA Davidson noted that Target's margins have expanded by 140 basis points from their 3.5% trough in the first quarter of 2023. The rebound suggests that the retailer has regained some operating leverage after a period of pressure.

DA Davidson believes Target still has significant potential to improve both revenue and earnings. There is "plenty of room to go, both on the sales and profit, yielding higher earnings power," said the firm. 

Also, Barclays raised its price target for Target to $140 from $115 but kept an ‘Underweight’ rating on the stock. Target stock edged 0.01% higher overnight, Wednesday, after clocking its best day in nearly two months in the regular session. 

Target CEO Highlights Traffic Gains, Price Cuts 

Target is leaning on a refreshed strategy focused on value, merchandising and technology as the retailer works to build more consistent growth and attract shoppers more frequently.

CEO Michael Fiddelke said during the Q2 earnings call that the company is focused on serving busy families with a mix of style, quality, design and affordability. The strategy centers on four areas: stronger merchandising, a better shopping experience, faster technology development and greater investment in employees and communities.

Target saw customer traffic rise 3.6% from a year earlier during the quarter. Fiddelke said the increase also represented a modest improvement on a two-year basis compared with the first quarter, suggesting shoppers are gradually returning to the retailer more often.

“Over the past year alone, we've lowered prices on more than 10,000 items, reinforcing our commitment to ensuring families can find a unique combination of style, quality, and affordability every time they shop with us.”

TGT Stock: Retail Stance 

On Stocktwits, retail sentiment around the stock remained in ‘extremely bullish’ territory. 

A user said, “$TGT 200+ by EOY or before! Holiday spending right around the corner !”

TGT stock has gained 62% year-to-date. 

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