Target Corporation (TGT) shares soared 5.3% on Wednesday, closing at $141.20 and hitting a new 52-week high of $141.25. The rally outpaced the broader retail sector, as the SPDR S&P Retail ETF (XRT) added 2.9% on the same day.
Wall Street Targets Surpassed
The strong close pushed Target's stock 8.6% above the Wall Street median price target of $130 and 4.5% above the average target of $135.06, according to FactSet data. The move comes after Wolfe Research analyst Spencer Hanus upgraded the retailer to Outperform from Peer Perform, setting a $162 price target and naming it a top pick heading into year-end.
Wolfe Research's Bullish Call
Hanus highlighted a "rhythm that we haven't seen in years" at Target, calling the retailer "a destination once again." He pointed to improved store execution, faster summer resets, and a 3-to-1 skew in shares favoring the upside, with a bull case of $160 and downside risk to $120. The upgrade implies roughly 14.7% upside from Wednesday's close.
Non-Merchandise Sales Surge
Target's non-merchandise sales jumped nearly 25% in the first quarter, driven by growth in Roundel advertising, Target Circle 360, and Target+ revenue. This category now contributes significantly to the bottom line, alongside a 6.4% increase in merchandise sales. The shift has helped boost gross margins to 29.0%, up 80 basis points from 28.2% a year ago, thanks to more efficient supply chains, higher advertising revenue, and fewer markdowns.
Strong Comparable Sales
Comparable sales rose 5.6% in the first quarter, with customer traffic up 4.4% and digital comparable sales jumping 8.9%. Same-day delivery through Target Circle 360 surged over 27%. The company now expects 2026 sales to grow about 4% and earnings to land near the high end of its $7.50 to $8.50 forecast.
Valuation and Risks
Despite the rally, Target's price-to-earnings ratio of around 18.7 still lags behind rivals Walmart (WMT) at 41.8 and Costco (COST) at 48.3. However, the stock has less cushion for disappointment after the recent gains. Wolfe's bear case of $120 is roughly 15% below the current price. Management has cautioned that higher product costs, increased wages, more field hours, and stepped-up marketing could weigh on profits. CEO Michael Fiddelke noted in May that "much more work" lies ahead and the company remains "disciplined and flexible" amid an uncertain environment.
Market Context
The broader market showed mixed signals on Wednesday. Walmart shares slipped 0.3%, while Costco added 0.3%. The S&P 500 ETF (SPY) eased 0.1%. Trading volume for Target reached 5.9 million shares, exceeding the 65-day average of 5.35 million, indicating strong investor interest following the upgrade.
