Analyst Bradley Thomas said in a note to investors that his proprietary data suggests the Union, New Jersey-based company's same-store sales trends have been improving.
In addition, Thomas said he believes that new CEO Mark Tritton and his merchandising background should be a "strong fit" for the company's needs.
Tritton, a three-decade retail veteran, has been credited with launching Target's private-label development, which included more than 30 new brands in just 2 1/2 years and helped the group grow comparable sales for eight consecutive quarters. Tritton will succeed interim CEO Mary Winston on Nov. 4.
Thomas also said that asset sales or divestitures "could happen sooner rather than later" and could be material.
The stock's valuation points to a "sizable upside opportunity" with "relatively bearish sentiment baked in," Thomas said.
Earlier this month, the home-furnishings retailer posted weaker-than-forecast same-store sales and trimmed its full-year profit guidance, amid its ongoing turnaround program.