Target's (TGT) strong quarter and apparent growth trajectory was enough to prompt Stifel to lift its price target on the retailer.
The stock closed Wednesday with a gain 7.78% and was rising 2% to $79.11 a share Thursday.
Target's first-quarter earnings and revenue rose from the same period a year earlier and beat analysts' estimates. Guidance for EPS for the current quarter reflected a mid-point of $1.62, 1 cent ahead of analysts' estimates.
"We view the result favorably, reflecting Target-specific share gains driven by efforts to drive traffic through brand launches, category refreshes, investments to improve customer convenience, and a focus on lower everyday prices on staples," said Stifel analyst Mark Astrachan, who lifted his price target to $85 from $80. The new price target reflects 9.5% upside from the stock's current level.
Target's e-commerce sales growth was 42% year over year, as curb-side pick-up options for online orders continued to be a success. The e-commerce growth rate compares with Walmart's (WMT) 37% seen in its earnings report last week.
Astrachan also pointed to Target's introduction of new private brands like Everspring, a natural home and personal care product.
"We think many initiatives are likely to sustain solid comp growth, in line with low- to mid-single digit expectations," Astrachan said. The sales growth, combined with "stabilizing" operating margins, prompted Astrachan not only to lift his EPS estimates for the next few years, but also to increase his earnings multiple to 13.5 times 2020 EPS estimates, which moved to 6.32 from $6.24. He is expecting Target's EBITDA margin to be 8.8% in all of 2020, compared to his expectation on Walmart's to be 6.1%.