This Analyst Sees Better First Quarter For Target

Buying in big box discount stores is gaining momentum thanks to a combination of macroeconomic factors, with the improvement set to particularly benefit Target Corporation (NYSE: TGT), Bank of America said Friday.

The Target Analyst

Robert Ohmes has a Buy rating and $150 price target on Target.

The Target Thesis

The BoA Discount Store Demand Indicator, which tracks inflection points for the big box discount retailers, shows a return to strength in the first quarter, driven in part by continued strength in confidence and borrowing, Ohmes said.

"By month, the indicator accelerated in January and is tracking well above last year’s levels, signalling a strong finish to F4Q that has continued into F1Q," Ohmes wrote in a Friday note.

Ohmes said the indicator is showing a likely sequential reaccerleration in first quarter same-store sales for Target, as it continues to move past difficulties in toys and electronics that it saw in the fourth quarter and a difficult holiday season that was squeezed by a shortened buying period.

Ohmes also noted that large format discount stores tend to do better in times of higher inflation, and the Consumer Price Index has continued to tick upward.

TGT Price Action

Target shares were off slightly on Friday, down 0.5% and trading at $117.67.

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