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Cowen’s analyst reveals his top retail stock ahead of earnings

By:
on Nov 14, 2022
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  • Oliver Chen is most excited about Target Corp this holiday season.
  • He sees upside in the department store chain to $120 per share.
  • Target stock is more attractive than Walmart in terms of valuation.

If he was allowed to buy one retail stock right now, Cowen’s Oliver Chen says he’d go for Target Corporation (NYSE: TGT).

Target to report Q3 earnings this week

Target is scheduled to report its Q3 results on November 16th. Consensus is for it to earn $2.14 a share this quarter versus a much higher $3.03 a year ago. Still, Chen said on CNBC’s “The Exchange”:

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We’re most excited about Target. We like companies that offer consumers clear value. Target’s valuation at 15 times PE versus Walmart’s 22 times positions it well. Also, it saw very good traffic last quarter. We think that momentum will continue.

He recommends that you buy Target stock as it has upside to $120. That translates to a 22% premium on its current share price.

The big box retailer also pays a dividend yield of about 2.50%.

Target did well in fixing inventory issues

Other reasons cited for the constructive view include same-day pickup at the store for goods purchased online. A portfolio comprising over 45 private labels or what Target calls “owned brands” is a meaningful catalyst as well, Chen added.

Most importantly, he likes Target Corporation for how swiftly it navigated the issues on the inventories front.    

Target did a good job quickly marking down product and clearing inventories. They’re ready for the holiday season. Inventories are in the right place and Target does traditionally an excellent job during events and experiential.

The department store chain is expected to see a 2.7% year-on-year growth in revenue this quarter. Versus its year-to-date high, Target stock is currently down about 30%.