Bank of America Securities has raised its earnings forecasts for Target Corporation (NYSE: TGT) while maintaining a cautious stance on the retailer’s stock valuation. Analyst Christopher Nardone reiterated an Underperform rating on the shares, even as he lifted his fiscal 2027 earnings-per-share estimate to $8.46 from $8.20. The revised price target of $124 remains approximately 19% below the stock’s trading level of $152.29 as of August 12.

The upgrade in estimates reflects stronger consumer trends and early signs of momentum in comparable sales following leadership changes at the retailer. Bank of America also increased its revenue forecasts for fiscal years 2027 through 2029. For the upcoming fiscal second quarter, the firm expects adjusted earnings of $2.34 per share, beating the Visible Alpha consensus of $2.30. Net sales are projected at $26.10 billion, with comparable sales growth estimated at 2.5%, slightly above the consensus forecast of 2.3%.

Margin Expansion and Cost Pressures

Margins are expected to be a key positive catalyst in the second quarter. Bank of America forecasts gross margin expansion of 90 basis points year over year to 29.9%, driven by easier merchandise-margin comparisons and reduced tariff pressure. This estimate is about 20 basis points better than market consensus.

However, operating expenses present a headwind. Target’s guidance includes approximately $1 billion in incremental selling, general, and administrative (SG&A) spending and another $1 billion in incremental capital expenditures. While Nardone noted these investments are strategically sound for the long term, they could limit near-term upside if comparable-sales growth decelerates in the second half of the fiscal year.

What the Numbers Show

The divergence between rising earnings estimates and the maintained Underperform rating highlights a valuation concern rather than an operational one. With the current stock price implying a multiple significantly higher than the firm’s base case of 14 times fiscal 2027 earnings, the market appears to have priced in more optimism than the analyst sees in the underlying fundamentals. The firm’s base case projects only about 4% earnings growth in fiscal 2028 as the company cycles through strong first-half trends and loses favorable margin comparisons.

Strategic Initiatives and Risks

Target is attempting to drive customer interest through new partnerships and product launches, including collaborations with Pokémon, LoveShackFancy, and Hollister. The retailer is also expanding its Target Beauty Studio to more than 600 stores in August.

Despite these efforts, risks remain. A slower turnaround in apparel and home categories could expose Target to increased competitive pressure and promotional discounting. Additionally, competitive pricing in food and beverage may limit market-share gains. An upside scenario would require a multiple expansion to roughly 16 times earnings and fiscal 2028 EPS of around $10, but Nardone believes the current risk-reward profile remains challenging after the stock’s recent rally.

Target shares were up 0.90% at $153.65 at the time of publication, trading near its 52-week high of $154.88.

Evercore ISI Group analyst Greg Melich has maintained an In-Line rating on Target (NYSE: TGT) and raised the price target to $135 from $130. The adjustment reflects a revised outlook on the retail giant's stock performance.

The new price target of $135 represents an increase from the previous target of $130. This move signals continued confidence in Target's ability to deliver value to shareholders.

Target remains a key player in the retail sector, and the updated rating underscores its potential for growth. The decision to raise the price target aligns with the analyst's positive stance on the company's fundamentals.

The revised target provides a clearer benchmark for investors tracking Target's stock. The In-Line rating suggests that the stock is expected to perform in line with the market.