Barron's Says Target Stock Looks Like A Bull's-Eye Investment

Barron's said Target Corporation TGT "came close to hitting a bull's-eye" and shares of the retailer are set to rally further, despite its fourth-quarter earnings missed Street view.

Target, which has a dividend yield of about 3 percent, reported better-than-expected fourth quarter comps of 1.9 percent versus Street analysts' consensus estimate of 1.4 percent.

Target's online sales climbed 34 percent, which was 12 percent more compared to e-commerce giant Amazon.com's 22 percent in its most recent quarter. Peer Wal-Mart Stores, Inc. WMT clocked 8 percent growth. The numbers show that Target's billions of investments in e-commerce operations are paying rich dividends as it and contributed 1.3 percent to the quarterly comparable sales growth.

Target's full-year earnings view topped Street. Looking forward to fiscal 2016, Target expects to earn $5.20 to $5.40 per share, which exceeded Wall Street's estimates of $5.16 per share. However, the company guided its first quarter earnings to a range of $1.15 to $1.25 per share - short of the $1.54 per share analysts were estimating.

Target's improved performance came as many retailers reported tepid results for fourth-quarter results as a warm winter merchants and forex woes have weighed on their topline.

Target's fourth quarter sales fell 0.6 percent from a year ago. The sales fell not because of lower demand but due to the sale of its pharmacy and clinical business to CVS Health.

Target said it earned $1.52 per share in the fourth quarter on revenue of $21.6 billion. Wall Street analysts were expecting the company to earn $1.54 per share on revenue of $21.75 billion.

Shares of Target trades 14.8 times its 2016 consensus earnings estimate and 13.4 times its 2017 estimate, which is well below its historical P/E.