Baird Upgrades Target, Says Retailer Has Positive Catalysts In Shipt, Store Remodels

Target Corporation (NYSE: TGT) stands to benefit from both fundamental company-specific catalysts and macro consumer trends in 2018, according to Baird.

The Analyst

Peter S. Benedict of Baird upgraded Target shares from Neutral to Outperform and raised the stock’s price target from $75 to $85. (See the analyst's track record here)

The Thesis

Target has been accelerating the pace of store remodels as part of the company’s “LA25” initiative to “reimagine” the store environment, Benedict said in a Wednesday note. This initiative will be a valuable catalyst for comps in 2018, he said. 

The retailer is also planning to ramp up private brand launches, with eight exclusive brands launched in 2017 and more planned through 2018, the analyst said. The success of Target private brands such as Pillowfort and Cat & Jack have helped to differentiate the company in the market, Benedict said. 

Target’s recent acquisition of the same-day delivery platform Shipt is expected to accelerate Target’s delivery fulfillment efforts and improve shipping time, the analyst said. 

“In short, we believe the addition of Shipt will help boost TGT’s digital sales in fiscal 18 and beyond.”

On the macro side, personal tax reform serves as a catalyst for higher consumer spending in retail, Benedict said. 

“Prospects for improved consumer spending on the heels of personal tax cuts provide a potentially significant additional layer of support for comps.”

Price Action

At the time of publication, shares of Target were trading up 2.90 percent at $76.02. 

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Photo courtesy of Target.