Key Moments
- HSBC upgraded Target to Buy and raised its price target to $190 from $125 per share, citing a traffic-led recovery.
- Q2 comparable sales increased 3.8%, with store-originated sales up 2.7% and underlying profits and EPS about 5% above consensus.
- HSBC based its new valuation on an 18x multiple of its revised FY27e EPS forecast of $10.61, aligned with Target’s five-year average PE.
HSBC Turns Bullish on Target
Investing.com — HSBC analyst Joe Thomas upgraded Target to Buy and lifted his price target on the shares to $190 from $125 in a research note on Wednesday, pointing to improving store traffic as the key driver behind a recovery in the business.
“Q2 results support the view that a traffic-driven recovery is underway,” wrote Thomas.
Evidence of Momentum in Q2
Thomas highlighted that the latest quarterly performance provided clear confirmation that Target’s turnaround is gaining traction. Comparable sales advanced 3.8%, supported by a 2.7% increase in store-originated sales. In addition, underlying profits and earnings per share came in around 5% ahead of consensus expectations.
“Growth was driven primarily by footfall rather than higher ticket values,” added Thomas. “This indicates to us that Target is rebuilding customer traffic and that its store base is not being materially cannibalised.”
| Metric | Detail |
|---|---|
| New rating | Buy |
| New price target | $190 (from $125) |
| Q2 comparable sales growth | 3.8% |
| Q2 store-originated sales growth | 2.7% |
| Underlying profits and EPS vs consensus | ~5% ahead |
| Revised FY27e EPS | $10.61 |
| Valuation multiple | 18x FY27e EPS |
Outlook for Earnings and Sales
HSBC argued that there is “potential for earnings forecasts to be exceeded in the short and medium term.” The note observed that, on a year-to-date basis, the two-year comparable sales growth rate stands at 1.7%. According to HSBC, its full-year projections only require a 0.5% two-year comparable sales growth rate in the second half to be achieved.
Valuation Framework
In Thomas’s view, “Shares look inexpensive if we include potential earnings upside,” with HSBC’s updated valuation derived from applying an 18x multiple to its revised FY27e EPS estimate of $10.61. The bank stated that this multiple is consistent with Target’s five-year average historical price-to-earnings ratio.
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