Target Corp (NYSE:TGT)’s second quarter results will provide a key test of whether the retailer’s recent turnaround is gaining lasting momentum, with UBS analysts expecting comparable sales growth to accelerate on a two-year basis despite tougher year-ago comparisons.
UBS expects Target to report second-quarter comparable sales growth of 3% or more, above its 2.5% estimate and the 2.1% consensus forecast. The quarter will include a roughly 50 to 100 basis point headwind from Target lapping the launch of Nintendo Switch in the second quarter of 2025, along with unusually strong collectibles demand in the year-ago period.
“We expect Q2 to demonstrate continued progress,” UBS analysts wrote, pointing to continued improvements across Target’s assortment and operations. The firm expects the retailer’s two-year comparable sales stack to indicate an acceleration even if quarterly growth moderates from the first quarter.
UBS said improvements in Food & Beverage, Health & Wellness, Fun 101 and Home should continue to support results, alongside traffic-driving partnerships with brands including LoveShackFancy, Pokemon and Roller Rabbit. The firm also expects ongoing labor investments, improved inventory discipline and continued growth in higher-margin ancillary businesses to contribute.
The analysts said their checks indicate demand trends have remained relatively broad-based across customer cohorts, merchandise categories and geographic regions. While growth could moderate from first-quarter levels, UBS said the overall trajectory remains consistent with a business gradually rebuilding momentum.
The second quarter results should help determine whether Target’s first quarter performance marked the beginning of a sustainable recovery or was supported primarily by favorable external factors, according to UBS.
The firm said many of Target’s recent challenges were operational in nature, including weaker store execution, merchandising presentation, in-stock positions and the overall shopping experience. UBS believes Target’s current leadership team is positioned to address those issues, given management’s familiarity with the company and its historical operating standards.
“While execution risk remains, we believe the company is further along in identifying and addressing its underlying issues than many investors appreciate,” the analysts wrote.
UBS expects Target to maintain a conservative stance on its guidance, although it sees the potential for some early signs of improvement. If Target delivers comparable sales growth of roughly 3% to 3.5% in the second quarter, UBS believes the outlook for the remainder of fiscal 2026 would become increasingly favorable.
At the midpoint of that range, Target would need roughly 1.5% comparable sales growth in the third and fourth quarters to reach the high end of its existing 2.5% to 3% full-year comparable sales growth guidance, UBS said.
UBS also raised its price target on Target to $166 from $144, above current levels of $147, based on roughly 17 times its updated calendar 2027 earnings estimate of $9.63 per share, compared with its previous multiple of about 15 times and earnings estimate of $9.50.
The analysts said the higher price target reflects a stronger comparable sales outlook and margin opportunities tied to improved execution, Target’s initiatives and assortment changes.
“We continue to be bullish on the outlook for TGT shares from here,” UBS analysts wrote, adding that they believe the market may be underestimating the duration of Target’s growth opportunity.
The firm expects Target’s assortment changes, inventory management improvements and efforts to grow alternative revenue streams such as retail media and marketplace to provide additional opportunities beyond fiscal 2026.