Oppenheimer has upgraded Target (TGT, Financial) to a preferred stock rating, maintaining an "outperform" status despite disappointing third-quarter results and a downgraded outlook for fiscal year 2024. Analyst Rupesh Parikh highlights an improved outlook for Target to reach a price target of $165, citing a compelling risk/reward scenario.
Parikh identifies several positive factors for Target, including an attractive entry point for investors, achievable fourth-quarter guidance, a 6% operating profit margin, and an appealing 3.52% dividend yield. Despite a 23% drop in Target's stock following its guidance announcement, Parikh believes investor sentiment is overly negative.
The analyst attributes the forecast to temporary challenges such as fewer holiday shopping days, discounting risks, and headwinds in non-essential categories. However, Parikh remains optimistic about Target's long-term prospects.
He emphasizes that Target's digital efforts, store investments, success in exclusive brand sales, gradual competitor clearances, and collaborations with other brands and retailers position the company well to capture market share. Parikh advises investors to take advantage of the current stock price dip as a buying opportunity.
Target is listed among Oppenheimer's top picks alongside Church & Dwight (CHD), Costco (COST), Freshpet (FRPT), SharkNinja (SN), and Walmart (WMT).
