Credit Suisse On Target: Much More Work To Be Done

Michael Exstein of Credit Suisse reiterated a Neutral rating on Target Corporation (NYSE: TGT) on Wednesday with a price target raised to $63 from $55, after the company's third-quarter results."Target eked out moderate top-line growth in the U.S. and Canada, but at the cost of continued intense promotions," Exstein wrote.Exstein notes that Target's U.S. comps rose 1.2 percent due to strong sales in electronics and a trade-up in consumables. However, gross margins deleveraged 50 basis points while Canada "has yet to show signs of a turnaround" as the segment posted gross margins "well below" U.S. levels.The analyst adds that management should consider strategic alternatives for its Canadian operations and that doing so "will become increasingly imperative" after the holiday season.Unfortunately, Target Canada isn't the company's only concern heading in to 2015.According to Exstein, 2015 will be "even more challenging" for its domestic operation as the company faces a dilemma between sustaining sales or recovering gross margins. The analyst adds that it is "unlikely" for both gross margins and sales to simultaneously rise in the new year.Shares of Target recently traded at $71.80, up 6.3 percent.