Target (TGT 0.18%) stock may be up by more than 23% in the last six months, but that doesn't tell the whole story. The retailer had such a rough past two years that the stock is still more than 30% below where it was to start 2022.
But Oppenheimer analyst Rupesh Parikh has been bullish on Target and just raised his price target on the stock by $10 to $170 per share while maintaining a buy rating. That's about 13% higher than where the stock recently traded. With its fourth-quarter and full-year 2023 financial update coming on March 5, Parikh clearly thinks there's good news ahead.
Earnings moving higher
Target has already made solid progress on improving inventory issues that led to lower profit margins as it was forced to unload product at fire-sale prices. Net earnings for the first nine months of 2023 were 45% higher than the prior year period. That was driven by higher operating margins as the company corrected its inventory situation.
Even with comparable sales expected to remain lower year over year in the fourth quarter, Target looks like it will announce 2023 net earnings that surpass pre-pandemic levels. Oppenheimer thinks management may even announce higher operating margin targets in its upcoming report. The analysts already conservatively see fiscal year 2024 earnings rising by mid- to high-single digits compared to the fiscal year 2023 period that closed at the end of January.
The investment firm expects that growth to accelerate through fiscal 2025 as well.
Investors looking for passive income should also consider owning shares of Target. The company has declared, and increased, dividends annually since it began trading publicly in 1967. Even through the tumultuous last three years, Target's dividends have increased by more than 60%. That's one more reason to own the stock as the underlying business gets back on track.
