Is Target Stock a Buy After Its Beat-And-Raise Quarter?

Outside of Target store — (Image credit: Diane Macdonald / Contributor/Getty Images)

Target (TGT) stock is one of the best stocks on Wall Street Wednesday, after the discount retailer beat top- and bottom-line expectations for its second quarter and raised its full-year profit forecast.

In the three months ended August 3, Target said its revenue increased 2.7% year-over-year to $25.5 billion, driven by a 2% increase in comparable-store sales. Its earnings per share (EPS) were up 42.4% from the year-ago period to $2.57.

"We made a commitment to get back to growth in the second quarter, and the team delivered, all while expanding operating margins and growing EPS by more than 40% compared to last year," said Target CEO Brian Cornell in a statement. The executive added that the growth "was driven entirely by traffic in stores and our digital channels, with double-digit growth in our same-day delivery services."

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The company also saw solid trends across several discretionary categories, notably apparel and beauty.

Target's results cruised past analysts' expectations. Wall Street was anticipating revenue of $25.2 billion and earnings of $2.18 per share, according to Yahoo Finance.

For the third quarter, Target said it expects a flat to 2% increase in comparable-store sales and earnings per share in the range of $2.10 to $2.40. The midpoint of its EPS forecast, $2.30, comes in ahead of the $2.24 analysts are expecting.

For the full fiscal year, Target said it now expects its comparable-store sales to come in at the lower half of its previous forecast of a flat to 2% increase. Still, the company lifted its profit forecast, now anticipating earnings per share will arrive between $9 and $9.70, up from its previous range of $8.60 to $9.60.

"Looking ahead, even as we maintain the measured outlook that has served us well, we are focused on building on this positive momentum by executing our strategy and providing the unique combination of newness and value that consumers can only find at Target," Cornell said.

Is Target stock a buy, sell or hold?

Target was struggling on the price charts heading into Wednesday's session and was up a modest 3% for the year to date on a total return basis (price change plus dividends). But Wall Street has kept the faith in the consumer discretionary stock.

Indeed, the consensus recommendation of the 36 analysts following TGT that are tracked by S&P Global Market Intelligence is Buy. And while the average analyst target price the stock is $169.42, representing implied upside of about 3% from current levels, some price-target hikes could come down the pike after today's earnings-induced rally.

Financial services firm CFRA Research is one of those that lifted its price target on the stock after earnings, to $188 from $175.

"Discretionary sales continue to improve, with apparel as the biggest standout this quarter," says CFRA Research analyst Arun Sundaram. "Operating margins hit 6.4%, an important milestone on TGT's journey back to 6% full-year operating margins, due to cost savings, mix, and improvements in shrink." The analyst adds that he remains Buy-rated "as we like TGT for its earnings growth potential and relatively underwhelming valuation."

Meanwhile, Oppenheimer analyst Rupesh Parikh was upbeat about Target's $155 million in stock buybacks in Q2, the time since 2022 the company has repurchased shares. "TGT remains a top pick for us," Parikh says, adding that "we would continue to take advantage of any dips" in the share price.

Joey Solitro is a freelance financial journalist at Kiplinger with more than a decade of experience. A longtime equity analyst, Joey has covered a range of industries for media outlets including The Motley Fool, Seeking Alpha, Market Realist, and TipRanks. Joey holds a bachelor's degree in business administration.