Why This Target Analyst Says Retail Stocks Could Experience 'Upward Bias' In Months Ahead

Target Corporation TGT shares gained ground Friday after the discount retailer scored an upgrade on Wall Street.

The Target Analyst: Gordon Haskett analyst Chuck Grom upgraded Target from Hold to Buy and raised the price target from $255 to $300.

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The Target Takeaways: In the upgrade note, Grom said he's been bullish on Target for years and only downgraded the stock to Hold in December when the company faced near-term growth uncertainty during the holiday season. He had also become uneasy with the sustainability of Target's drive-up business.

Gordon Haskett's recent data work, store checks, customer survey and conversation with Target management suggest Target appears to be on the right track, the analyst said. 

"Furthermore and as we think about the broader retail landscape…there remain a number of cross currents – both macro and micro that will influence comp trends in the coming quarters, but sentiment appears to have swung too far in the negative direction (XRT down 18.0% YTD vs. XLP up 2.0% + plethora of Sell-Side downgrades in recent weeks) in our view, and we suspect that the group could see more of a upward bias in the coming months – a period of time when the XRT tends to perform better (historically, April-July outperformance)," he said.

Grom said he expects retail winners to begin to outperform losers. In addition to Target, he is bullish on Costco Wholesale Corporation COST, BJs Wholesale Club Holdings Inc BJ, Dollar General Corp. DG, Home Depot Inc HD, Lowe's Companies Inc LOW and Tractor Supply Company TSCO.

TGT Price Action: Target shares were trading 2.95% higher at $234.92 midday Friday, according to Benzinga Pro. 

Benzinga's Take: Target and other discount retailers could also benefit from inflation as rising grocery prices drive shoppers away from higher-end grocery stores.

Photo courtesy of Target.