The Time is Now; Upgrading to Outperform + Top Pick... 

Research evidence excerpt

The Time is Now; Upgrading to Outperform + Top Pick...

June 23, 2026

Investment Conclusion

We are upgrading Target to Outperform from Peer Perform with a $162 Target Price. We think Target is in the

early stages of a multi-year turnaround, with underappreciated earnings power as its strong underlying assets

are unlocked. The pace of change and the rhythm of the business are improving, with Target finally back to playing

offense. Now turnarounds have failed at Target before, and the business is volatile, but we like the catalyst path

in the 2H and there is a solid skew here. We are moving our 2027 EPS estimate to $9.52, vs. consensus of $8.95,

and applying a 17x multiple (with further upside to 18-20x).

TGT's valuation has continued to re-rate and is now trading at 15.3x vs WMT at 38.5x and COST at 42.6x (refers

to NTM P/E). Relative to other retailers such as DG (15.3x), DLTR (16.0x), and FIVE (20.8x), it trades at a discount.

We don't expect Target to trade at a P/E multiple close to 40x like its Mass Merchant peers. If Target can sustainably

improve SSS and inch back to 6% operating margins, we could see the business re-rate further.

Relative to the S&P, the valuation is more reasonable, with the stock trading at a 26% discount vs. the last 5-Yr

average of 23%. Year to date, Target has traded up 29% vs the S&P +9%, WMT +4%, and COST +11%.

Model Updates: We are raising our 2026 comp estimates to +2.9% vs +2.3% previously to reflect momentum from

store resets, partnerships, and key events (GTA, Circle Week, etc.), while modestly lowering 2027 SSS to +2.2% vs

+2.6% previously. We're leaving EBIT margins unchanged for 2026 and raising 2027 margins modestly, driven by

sales leverage and advertising flow-through. Our EPS estimates are now $8.48 (vs.