Is Target stock a buy after making the list in BofA’s top Q4 retail picks?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Oct 13, 2021
  • Target shares on Wednesday edged higher by 1.57% after BofA put the stock in its list of top retail picks.
  • The firm cited the company’s ability to overcome current supply chain challenges and inflationary costs.
  • The analyst expects TGT to benefit from a strong inventory position and favourable port access.

On Wednesday, Target Corp (NYSE:TGT) shares edged higher 1.57% after making the list in Bank of America’s top retail picks for Q4. Analyst Robert Ohmes picked Target and Walmart Inc. (NYSE:WMT) as the two retail chains immune from the current supply chain constraints and rising costs.

The analyst cited TGT’s and WMT’s strong inventory positions and favourable port access as a significant benefit. Walmart shares edged slightly lower despite BofA’s upbeat statement.

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The analysts also called Target and Walmart omnichannel leaders, which could boost their sales this holiday season.

Is it time to bet on TGT?

From a valuation perspective, Target shares trade at a compelling P/E ratio of 18.34, making the stock an attractive option for value investors. In comparison, Walmart trades at an equivalent valuation of 39.27 P/E. 

Moreover, analysts expect Target’s earnings per share to grow by more than 36% this year, before rising at an average annual rate of about 13.29%.

Therefore, the stock also looks like an exciting opportunity for growth investors ahead of the holiday season.

Source – TradingView

Is a channel breakout imminent?

Technically, Target shares appear to have recently rallied to move closer to the trendline resistance of the descending channel formation. However, the stock is still far from reaching the overbought conditions of the 14-day RSI. In addition, it remains several levels below the 100-day moving average.

Therefore, investors could target extended gains at about $244.41, or higher at $253.92, while $225.01 and $215.50 are crucial support zones.

Target looks exciting

In summary, although Target shares are up 2.65% this week, the stock is still far from reaching overbought conditions. Moreover, Target trades at relatively better valuation multiples than Walmart, the other retailer tipped to do well by BofA.

Therefore, with the company also offering exciting earnings growth prospects, it could be time to buy Target shares.

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