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[video] Target's Latest Glitch: Some Gift Cards Not Properly Activated

NEW YORK (TheStreet) -- Target (TGT) shoppers have had to worry about being one of the millions of customers involved in a massive credit card security breach, now they also have to worry whether the gift cards they bought during the holiday season have been activated.

The discount retail chain with nearly 2,000 stores confirmed a small portion of gift cards sold recently were not properly activated.

Target spokeswoman Molly Snyder said on Thursday that less than 0.1% of the cards sold during the holiday period were affected. The company apologized and promised to still honor the gift cards.

If customers discover their gift card has not been activated, they can bring it to the guest service desk at their local Target store or call 1-800-544-2943 for assistance, Snyder added.

Target suffered a PR nightmare last month after it said that more than 40 million credit and debit card transactions at its U.S. stores had been hacked over a period of three weeks during the busiest shopping time of the year.

The event has been labeled as one of the largest security breaches ever. Last week that information related to shoppers' PIN numbers were also compromised, the retailer said.

Target said the issue has been resolved but it is working with federal agencies in an ongoing investigation.

Despite the security breach, Piper Jaffray analyst Sean Naughton raised his fourth-quarter comparable-sales estimates for Target from flat to positive 1.5%.

Naughton wrote in a note on Thursday that customers responded well to Target's "holiday offerings and more importantly its upgraded assortments in the electronics category." Naughton rated the company at "overweight."

Macro factors including an improved December consumer expectations index, sales reporters from external vendors, cooler weather, a flexible fulfillment launch and the new gaming console launches in November all are expected to help store sales, Naughton wrote.

"Given the above data points combined with our store observations, we would be surprised if same store sales trends were not between 1% and 2%, well above the flat comp guidance," the note said.. "We believe Target is on pace to achieve its strongest same-store sales gain of the year and easily surpass guidance and consensus of flat. Our revised +1.5% estimate is street high, but we see potential for additional upside to our estimate if January remains strong."

Naughton noted that the comp estimates reflects a 60-basis point headwind to sales related to the company's 10% discount weekend, following its Dec. 19 announcement of the security breach.

Target shares were rising 1.2% to $64.02 on Thursday. The stock rose 9.5% in 2013, compared to a 29.6% rise for the S&P 500.

Naughton said he believes that Target shares have already priced in the bad news. "Thinking about the stock as an investment versus a trade, this seems to be a compelling entry point as it is clear investors do not believe the $8 in earnings power," the note said.

That said, the security breach story "is not going to go away anytime soon and we would not be surprised if additional, negative items come to light," Naughton wrote.

-- Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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