According to Edward Kelly of Wells Fargo, Target’s (NYSE:TGT) recent decline has created a compelling purchasing opportunity.
In a nutshell, Kelly says that Target (NYSE:TGT) has entered oversold territory as a result of a sharp sell-off fueled by self-admitted inventory problems and a wave of competition projection reductions.
While the analyst acknowledged that inventory problems are a significant obstacle, the fact that they also affect Walmart (NYSE:WMT) and other important retail competitors raise the possibility that Target was unfairly penalized.
Kelly said he believes that management is not getting enough credit for its decisive moves early this year. He added that while the $2 billion inventory blow was difficult to accept, putting share retention first should have long-term advantages.
When everything is said and done and there have been some early indications of success, keeping as much of the +30% sales/store rise since 2019 should ultimately determine the profits basis.
Analyst Believes Target Should be Rewarded, Not Penalized
In the long run, Kelly said the corporation should be rewarded for choosing to be among the earliest and most open about inventory difficulties.
While there is still some margin risk ahead given consumer uncertainty, Tareget (NYSE:TGT) seems better positioned than most into the second half. Target (TGT) should now have one of the cleaner inventory set-ups in retail and experience an earlier margin rebound than others, Kelly indicated.
Given the more optimistic outlook for Target’s future, Kelly came off the sidelines for the first time since lowering shares to “Hold” in January and raised his rating on the stock from “Hold” to “Buy.”
Shares now have a $195 price objective from their previous $155, according to Kelly. A fair bull case, he continued, could result in gains of up to $220.
Shares of Target (TGT) increased 2.19 percent in premarket trading on Monday on little volume.
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