Target Corporation (NYSE:TGT) shares gained more than 10% on Tuesday after the company reported 9% sales growth in its fiscal fourth quarter and said it will continue to grow sales once the COVID-19 pandemic is over.
On Wednesday, Bank of America analyst Robert Ohmes listed 10 reasons investors should be buying Target stock:
- Target's Stores as a Hub strategy is working, including a 30% increase in average sales per store over the past two years.
- Same-day services have driven digital growth, allowing Target to compete with both brick-and-mortar retailers and Amazon.com, Inc. (NASDAQ:AMZN).
- Target is gaining market share in the food and beverage categories and is now the fourth-largest digital grocery store in the U.S. with a 13.2% market share.
- Target's own brands are boosting comps, growing 18% in 2021.
- Target is investing $300 million in its store associates in the coming year, which will improve the company's omnichannel services.
- Digital advertising is a long-term growth opportunity, and Roundel currently represents the second-largest component of Target's "Other" revenue.
- The Target+ invite-only marketplace grew 75% in 2021, and its Target Circle rewards program is also a large growth driver.
- Target is opening about 30 new stores per year and plans to remodel 200 stores in 2022, improving the shopping experience.
- Target is well-positioned to benefit from favorable U.S. demographic trends, including signs of a potential Millennial baby boom.
- Target's valuation remains attractive with the stock trading at just 15.2 times Ohmes fiscal 2023 EPS estimate of $14.40.
Related Link: If You Invested $1,000 In Dollar Tree Stock One Year Ago, Here's How Much You'd Have Now
"We expect profitability to improve through the year as 1H faces headwinds from difficult stimulus-driven comparisons and continued supply chain pressures and other cost increases," Ohmes concluded.
Bank of America has a Buy rating and a $298 price target for Target.
Benzinga's Take: It's hard not to like Target stock for all the reasons Ohmes highlighted, and he's not alone in his bullish outlook. Target has just one Underperform/Sell rating among 20 Wall Street analysts covering the stock.
Photo: Courtesy Target
