Holiday tip: Target may be a big retail sector winner

Evercore ISI fired off a Positive Tactical Trade call on Target (NYSE:TGT) on Wednesday as it headed into the end of the year with confidence in the retailer. The bull call reflects what the firm said is rising shopping intentions for holiday spending and a positive inflection of web traffic from a negative low single digit trend to a +mid-teen increase in December.

Analyst Greg Melich said the firm sees 8% to 10% upside in Target (TG) over the short term after the retailer outperformed in its spending intention survey. “Target showed solid spend intent in key traffic driving categories like Toys and Home Accessories. Target’s relatively lean inventory positioning heading into F4Q (i.e. inventory up 3% vs sales up 1%) should help contain mark down risk while shrink improvement can provide a margin benefit as well into CY25. Street EPS of $2.16 and comp sales of +0.1% appear reasonable vs. our outlook of $2.15 and +0.4% comp.,” updated Melich.

Evercore ISI said the key for TGT longs in 2025 will be assuming this year shakes out around the Street’s $8.60 EPS estimate, which gives investors room to underwrite EPS power in the +$9 per share range and 2026 EPS in the +$10 range.

Of note, Evercore ISI got it right when it issued a negative warning on Target (NYSE:TGT) just ahead of the Q3 earnings report and share price collapse.

Separately, Google search trends for Target (TGT) on important keywords have improved over the last 90 days in relation to Walmart (WMT) and Costco (COST).

Target (TGT) was up 2.55% in early trading on Wednesday. The retailer has recovered about half of the loss it saw when its holiday quarter guidance rattled investors last month.