Shares of Target Corporation (NYSE:TGT) have underperformed so far this year. The stock fell 6% year-to-date versus the S&P 500 Index (SPX) gain of about 21% during the same period. Nonetheless, Goldman Sachs analyst Kate McShane sees the retailer as the “best long idea for FY24.” McShane reiterated a Buy on TGT stock on December 12. Further, the analyst’s price target of $176 implies 29.74% upside potential from current levels.
Analyst Points to a Recovery in TGT Stock
The analyst noted that Target underperformed its peers in Fiscal 2023 as macro headwinds adversely affected consumers’ discretionary spending, and TGT had a higher mix of discretionary products. However, for 2024, McShane expects the Target stock to recover, led by market share gains due to improved merchandising. Also, the analyst predicts a normalized demand environment in 2024 and an improvement in consumer discretionary spending, led by a strong labor market.
McShane expects Target’s margins to improve and finds its valuation attractive. The analyst said that TGT stock is trading at the next 12-month price/earnings multiple of 15, which is below its historical average, suggesting limited downside potential.
While McShane is bullish about TGT’s prospects, let’s look at what the consensus estimate suggests for TGT stock.
What is the Outlook for Target?
Target is taking initiatives to boost its sales and profitability. The company is investing in stores, supply chains, and digital capabilities to grow its top line. Also, it is adding newness to its products and focusing on value pricing to support its revenue. Meanwhile, lower freight costs, solid inventory management, and favorable category and channel mix could continue to cushion its bottom line.
While the retailer is taking measures to improve its financial performance, the challenging macro environment keeps analysts cautiously optimistic about TGT stock.
Target stock has 14 Buy and 13 Hold recommendations for a Moderate Buy consensus rating. Moreover, analysts’ average price target of $151.04 implies 11.34% upside potential from current levels.
