Bank of America analysts maintained their ‘Underperform’ rating on Target Corp (NYSE:TGT) following the retailer’s recent earnings release, citing cautious optimism over the company’s turnaround efforts.
The firm also raised its price target slightly to $106 from $103, reflecting modestly improved margin expectations.
The analysts attended Target’s Community Day at the company’s Minnesota headquarters and highlighted the retailer’s focus on “investing in its people, stores, and merchandise and making the biggest change to its store floor pad in over a decade,” which they described as a logical strategy.
“We are encouraged by the actions being taken but think the ability to drive sustainable positive traffic & comp growth may take longer than the market expects based on the significant multiple rerating already seen in the stock,” they wrote.
Target plans to invest an incremental $1 billion in capital expenditures and $1 billion in its P&L in 2026, covering new store openings, remodels, updated merchandising layouts, payroll, marketing, technology, and AI initiatives. “Store changes are highlighted by doubling down on newness across each category,” the analysts wrote, highlighting the retailer’s push to refresh its merchandise and shopping experience.
Bank of America noted that first quarter earnings may be the low point of the year due to higher startup costs for new stores, front-loaded SG&A, and the lap of prior accrual adjustments.
“We find it hard to model positive comp growth every quarter beyond Q1 without seeing more proof of an inflection in discretionary categories,” they wrote.
Despite raising their fiscal 2026 EPS estimate by 3% to $7.60, the analysts reiterated caution. “We reiterate our ‘Underperform’ and remain cautious about an inflection to sustainable comp growth given intense competition and limited green shoots in discretionary categories,” they wrote.
Shares of Target traded hands at about $122 in the early afternoon on Wednesday, up almost 25% so far this year.