Target added to JPMorgan's focus list

Yahoo Finance’s Kristin Myers and Emily McCormick discuss JPMorgan adding Target to its analyst focus list as a growth idea, with a $154 price target.

Video Transcript

KRISTIN MYERS: And Target is in focus today after JPMorgan added the stock to its focus list. That's my attempt at a pun there. We have Yahoo Finance's Emily McCormick with all of those details. Hey, Emily.

EMILY MCCORMICK: Hi, Kristin. And we did see shares of Target actually rising to a record intraday high earlier today following this upgrade, adding-- of course, JPMorgan adding to the focus list shares of Target. So we did have that stock up as much as 2.6% at the highs of today's session. So to reiterate what all of this means, we had JPMorgan analyst Christopher Horvers raising his price target on shares of Target to $154 from $135 apiece. He also maintained his overweight rating. And that new price target implies at about 17% gain from yesterday's close.

Now, one of the things that he mentioned was that JPMorgan's field work and analysis indicates that Target's mid to high teens first quarter exit rate comparable same-store sales growth is likely to be sustained, although with some modest decelerations in food, beverages, and essentials, but offset by continued strength here in electronics, home, and apparel categories. Now, those latter categories are actually higher margin for Target, so it's something that we could potentially see helping profitability.

If we think about those first quarter results, we did see some margin contraction there. That was the one weak spot that we really saw in results for the first three months of the year. So something to potentially unwind in the second half and second quarter. Now, we also had Christopher Horvers adding in a quote, "Importantly, ongoing share gains in grocery, beauty, and essentials, combined with strong apparel and home comps, will support the long-term share gainer bull case, especially against its apparel competitors, and support our view that it can retain a large number of the customers it gained during the height of the pandemic."

Now, one other thing I want to point out as well that I hadn't seen any other analyst really highlighting here is the fact that Target could actually be a beneficiary of some of the brick and mortar, some of the mall retail closures that we've seen over the past couple of months. One of the things that JPMorgan mentioned was that some of these brands could actually pivot to trying to sell through Target.

So they could see some uptake there if we think about the fact that Target does tend to sell a variety of different items. Of course, they have what JPMorgan calls a cheap chic apparel and a variety of home furnishing options. So a couple of things to be bullish about if we're looking at shares of Target. Now, just taking a look for the year-to-date, we have Target shares up just under 5% since January, slightly outperforming the S&P 500.