Morgan Stanley Initiates Target at Overweight

Morgan Stanley is out with its report today on Target TGT, initiating TGT at Overweight. In a note to clients, Morgan Stanley writes, "We see TGT trading to $64 (12.5x 2013e EPS) once investors focus on Target's middle market opportunity in Canada. Our AlphaWise customer survey confirms macro pressure on US comps, but with valuation at trough levels and TGT down 15% YTD, it's in the stock. Target will see zero Canada revenue in the near term, but we estimate it will shoulder $0.19/share in lease and other startup costs in 2011 and $0.30/share in 2012. Once Canadian operations commence in 2013, however, we estimate Target will click into 16-20% EPS growth and free cash flow yield will increase from 7% to 13%." At the time of posting, shares of TGT were trading at $51.38, up 1.36% from Monday's close.