HSBC upgrades Target to Buy and lifts target to $190

HSBC analyst Joe Thomas upgraded Target to Buy from a previous rating and raised the price target to $190 from $125 per share in a note on Wednesday. Thomas told investors that a traffic-driven recovery is now underway for the retailer.

The upgrade followed second-quarter results showing comparable sales rose 3.8%, led by a 2.7% increase in store-originated sales. Thomas noted that underlying profits and earnings per share beat consensus by roughly 5%, with revenue growth driven primarily by footfall rather than higher basket values.

HSBC pointed out that two-year comparable sales growth stands at 1.7% year-to-date. The bank stated that Target needs only 0.5% two-year growth in the second half of the year to meet its full-year assumptions, creating room for near-term and medium-term earnings beats.

The new $190 target price applies an 18-times multiple to HSBC's revised fiscal year 2027 estimated earnings per share of $10.61. Thomas highlighted that this multiple aligns with Target's five-year average historical price-to-earnings ratio.