Target (TGT) has a compelling catalyst path ahead, with its upcoming Q1 results expected to validate that the company is moving in the right direction, UBS said in a note on Monday.
Despite a difficult few years, Target's recovery in 2026 is starting on a positive note. Key headwinds from last year, such as boycotts, one-time tariff costs, and heavy markdown activity, are easing, making the outlook cleaner, the analysts said.
At the same time, the benefits of Target's transformation plan are just beginning to show, with efforts focused on simpler operations, better merchandising, and improved in-store experience, the analysts said, adding that the market seems to be starting to recognize this progress as the stock is up about 20% year-to-date. However, the analysts believe there is still significant upside potential ahead.
The analysts said the market expects Target to report 1Q comparable sales growth of 4% to 5%, well above the company's guidance and the consensus forecast of around 1%. Recent traffic data also suggests the company may be outperforming Walmart (WMT) and Costco (COST) year-over-year, though comparisons are easier.
The analysts said they expect Target to deliver $0.30 to $0.40 in earnings per share upside in Q1, which could lift its full-year EPS outlook to $7.85 to $8.85 from $7.50 to $8.50. Analysts also believe there is room for further upward revisions, with potential to reach $9.50 or more this year. For Q2, the company is expected to guide to low-single-digit comparable sales growth.
UBS has a buy rating and a $144 price target on the company. Target is set to report Q1 results on May 20.
Price: $121.38, Change: $+2.94, Percent Change: +2.48%