HSBC says Target’s turnaround plan is showing real progress, which could give investors a good reason to take another look at the stock.
This week, HSBC upgraded Target and raised its price target by a large margin. The firm pointed to strong second-quarter earnings, solid guidance, and more shoppers visiting stores as signs that Target’s growth potential is improving.
Target shares went up slightly on Wednesday, adding to a strong year for the stock. Much of the recent gains are credited to new CEO Michael Fiddelke. According to Dow Jones Market Data, shares have climbed a lot since he became CEO in February.
The upgrade came after Target announced on Tuesday that it will lower prices on almost 2,000 items in home goods, clothing, and accessories to help shoppers find better deals before the holidays. This follows over 10,000 price cuts in the past year. Still, investors were not pleased, and Target’s shares closed lower on Tuesday even though the overall market stayed about the same.
HSBC did not comment directly on the newest price cuts, but noted that Target’s growth in the second quarter, which ended August 1, was mostly due to more people visiting stores, not higher prices or bigger purchases. HSBC sees this as a good sign, suggesting Target is bringing in more customers without hurting sales at its other stores.
Fiddelke started Target’s new turnaround plan in March, focusing on updating products, lowering prices on some items, and changing store layouts to help boost sales after several slow years. Investors have reacted well, and the stock has gone up a lot since the plan was announced. HSBC is also confident about Target’s future, noting that management raised its earnings forecast for the second time this year after the August earnings report. Target now expects to earn $8.25 to $9.25 per share for the year, up from the previous range of $7.50 to $8.50.
Target’s clothing and home sections are still behind other parts of the business, but HSBC noted some early good results from new children’s clothing and updated home products.
Overall, Wall Street’s opinion on Target is still mixed. According to a FactSet survey of 43 analysts, the average view on the stock remains neutral.
