It’s Been a Terrible Year for Target. Why a Wells Fargo Analyst Just Got Bullish.

Target stock has tumbled in recent months.


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With the shares off nearly 30% in 2022, it’s fair to say that Target hasn’t been terribly popular with investors. Yet it just gained a new fan at



Wells Fargo
.

Analyst Edward Kelly raised his rating on



Target

(ticker: TGT) to Overweight from Equal Weight, bumping up his price target to $195 from $155.

Target has tumbled in recent months, hurt by a downbeat first quarter in May and yet even more cautious commentary in June. The big-box store, like peer



Walmart

(WMT), is struggling to unload inventory such as apparel and home goods, which were popular during the Covid-19 pandemic but became some of the first areas consumers cut back on amid record high inflation. That has led to margin-crunching promotions and warnings about shoppers’ shifting habits.

Yet Kelly said that the selloff has gone too far, creating “the opportunity to pick up a proven share gainer into an underappreciated earnings recovery at the right price.”

He didn’t absolve Target for is current merchandising troubles but wrote that “it’s not alone (ahem …WMT) and management’s decisive action should help protect pandemic share gains (the real prize at the end of the day).”

He also said that most of the company’s margin pain is likely behind it, which means that it could bounce back more quickly than other retailers—especially as estimates have become so bearish following its recent announcements. Ultimately, Kelly predicts the company could earn $12.70 a share in 2023, well ahead of consensus.

About two-thirds of analysts tracked by FactSet are likewise still bullish on Target, despite its recent woes, with no bearish calls on the Street. That said, the average analyst price target has fallen nearly $100 since April, to $184.15.

Target is up 2.2% to $166.90 in recent trading.

Write to Teresa Rivas at teresa.rivas@barrons.com

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