Market Overview

Citi Thinks Target Could Turn Around Because Of This

Citi Thinks Target Could Turn Around Because Of This
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  • Target Corporation (NYSE: TGT) shares have declined 4.36 percent over the past six months, hitting a low of $72.94 on October 23.
  • Citi’s Kate McShane has initiated coverage of the company with a Buy rating and price target of $88.
  • McShane believes that the stock valuation is currently attractive, given that the company’s new focus areas are expected to bear positive results.

According to the Citi report, “While the competitive environment is intense for most broadline retailers given the lack of differentiation and price competition, we think TGT is focusing on the right initiatives to further distance themselves from and compete more with Wal-Mart Stores, Inc. (NYSE: WMT).”

Analyst Kate McShane also said that the stock is currently trading at a significant discount to its three-year average, while mentioning that Target has a history of robust share buybacks, while the balance sheet offers the company the ability to finance potentially larger share repurchases, especially if comp improvement persists.

Related Link: Your Local Target Store Might Be Closing Soon

“At 2015E debt levels, TGT has the ability to raise ~$2 billion in debt in a couple years,” McShane elaborated.

Currently, management is focused on initiatives to drive traffic, such as a focus on signature categories, including Baby, Home and Healthcare, which continue to outperform the company average.

“Exclusives have benefited its hardlines business,” the report said, while adding, “Omni-Channel build out is contributing meaningfully to comps.”

McShane also believes that Target’s focus on omni-channel rather than square footage growth is the “right formula,” with the company investing 20 percent of its OCF on the omni-channel strategy, with flat square footage growth.

McShane said that this would help Target “outpace competitors by leveraging its existing B&M network.”

Latest Ratings for TGT

Sep 2016GuggenheimInitiates Coverage onNeutral
Sep 2016Cowen & Co.DowngradesOutperformMarket Perform
Aug 2016CitigroupMaintainsBuy

View More Analyst Ratings for TGT
View the Latest Analyst Ratings

Posted-In: Citi Kate McShaneAnalyst Color Long Ideas Initiation Analyst Ratings Movers Trading Ideas Best of Benzinga


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